iDrive Logistics LLC v. Adagio Teas Inc.

• Decision Date: 06 October 2022
• Docket Number: 20210088-CA
• Citation: 2022 UT App 115
• Parties: iDrive Logistics LLC, Appellee, v. Adagio Teas Inc., Appellant.
• Court: Utah Court of Appeals

2022 UT App 115

iDrive Logistics LLC, Appellee, v. Adagio Teas Inc., Appellant.

No. 20210088-CA

Court of Appeals of Utah

October 6, 2022

Fourth District Court, Provo Department The Honorable Christine S Johnson No. 190400543

Troy L. Booher, Dick J. Baldwin, Taylor Webb, and Matthew G Bagley, Attorneys for Appellant

David R. Parkinson and Ronald F. Price, Attorneys for Appellee

JUDGE DAVID N. MORTENSEN authored this Opinion, in which JUDGE GREGORY K. ORME and JUSTICE JILL M. POHLMAN concurred. ^[1]

OPINION

MORTENSEN, JUDGE

¶1 Adagio Teas Inc. (Adagio) contracted with iDrive Logistics LLC (Kenco^[2]) to assist it in obtaining reduced prices for shipping costs. After a dispute over calculating Kenco's fee for services arose, the parties eventually settled the dispute regarding outstanding invoices. Adagio applied this same agreed-upon rate to four invoices moving forward. Litigation ensued when a dispute arose again. On a motion for summary judgment, the district court determined that the parties had modified their original agreement and that Adagio had breached that modified agreement. Adagio now appeals, and we affirm.

BACKGROUND^[3]

¶2 To save money on shipping, Adagio entered into a contract (Contract) with Kenco in which Kenco would obtain shipping discounts for Adagio and Adagio would pay Kenco a portion of the resulting savings. However, after some time had passed, Adagio alleged that Kenco had been overbilling. The dispute boiled down to Adagio believing it would pay Kenco a portion of a 4% savings while Kenco believed Adagio would pay a portion of a 22% savings. The greater the savings, the greater Kenco's fee would be.^[4] After Adagio informed Kenco of its belief that Kenco had been overbilling, the parties engaged in lengthy negotiations regarding the terms of the Contract and the appropriate billing rate.

¶3 Ultimately, Kenco offered to meet Adagio in the middle and proposed to charge based on a 10.5% rate. Kenco stated, "We are willing to make this change moving forward as we value you as a customer" and indicated that it would even be willing to recalculate the most recent invoice using that new baseline. (Emphasis added.) Kenco continued, "We appreciate your concern and feel we have found a way to address [it] moving forward." (Emphasis added.) But Adagio was not satisfied and requested that any discount be applied retroactively. Kenco summarized these developments in an email:

Originally when we discussed[,] I had offered as a goodwill gesture to adjust calculations from October moving forward. Last call I had offered to extend that to open invoices, you had asked to go to the beginning. You were not realizing at the time that meant back into 2016. You then asked for it to include 2017 shipments, not just open invoices. Rather than adjusting invoices[,] you agreed on last call that a Credit Memo would be acceptable. I have made a Credit Memo and I have included all shipments in 2017.

(Emphasis added.) (Cleaned up.) Kenco continued,

I have accommodated what seemed to be the last area we were apart when we spoke, i.e. all 2017 shipments rather than open invoices. I would like to discuss when timing for getting caught up on the amounts still outstanding.

Adagio's response was short and to the point:

Thank you for adjusting the pricing of all 2017 shipments. Will gladly speak tomorrow. . . . Appreciate your help[.]

¶4 Once Kenco offered to provide a credit toward past paid and unpaid invoices through 2017 (in essence reimbursing Adagio as if it had paid for those invoices based on a 10.5% rate), Adagio accepted the credit, and the dispute regarding invoices up to that point was resolved. Kenco then sent-and Adagio paid- four post-credit invoices based on the same 10.5% rate used to calculate the credit. But eventually, Adagio refused to pay any more invoices under this rate-largely because using the 10.5% rate actually increased Adagio's shipping costs-and litigation followed.

¶5 Adagio's acceptance of the credit and payment of invoices based on the 10.5% rate provided the crux of that litigation. The parties disagreed about (1) whether those actions demonstrated that the parties modified the Contract and (2) whether that modification applied to invoice calculations moving forward. Kenco asserted that Adagio's actions effectuated such a modification, but Adagio asserted that there was no modification and that it paid the four post-credit invoices only on a "trial basis, as a good-faith gesture to help [defuse] tensions between the parties." When the parties filed cross-motions for summary judgment, the district court reviewed the undisputed facts and explained, "In the present case, there is an objective manifestation of an intention to be bound by a verbal modification. That manifestation is documented in the email exchanges between the parties, as well as in Adagio's course of conduct thereafter." The court continued, "The expressed words and deeds of both parties thus demonstrate an intent to be bound, and an intent to waive any formal writing." The district court granted summary judgment in Kenco's favor, and Adagio now appeals.

ISSUE AND STANDARD OF REVIEW

¶6 On appeal, Adagio contends that the court erred in granting Kenco's summary judgment motion in the face of "disputed issues of material fact as to the temporal scope of the parties' agreement." We review a grant of "summary judgment for correctness, giving no deference to the [district] court's decision." Bahr v. Imus, 2011 UT 19, ¶ 15, 250 P.3d 56.

ANALYSIS

I. Summary Judgment

¶7 "Summary judgment is only appropriate if the moving party shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Arlington Mgmt. Assocs., Inc. v. Urology Clinic of Utah Valley, LLC, 2021 UT App 72, ¶ 10, 496 P.3d 719 (cleaned up). In determining if the district court properly granted summary judgment, the questions before us are twofold: (1) whether, "view[ing] the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party," there exists "no genuine dispute as to any material fact" about the parties modifying the Contract to calculate invoices using an adjusted rate moving forward after crediting the past invoices and (2) whether a modified contract existed under which Kenco can recover. See iDrive Logistics LLC v. IntegraCore LLC, 2018 UT App 40, ¶ 30, 424 P.3d 970 (cleaned up).

¶8 Adagio contends that the district court erred in granting summary judgment "by making inferences and viewing the facts in the light most favorable to Kenco, the moving party, as to whether the parties had a meeting of the minds about the temporal scope of their agreement." Specifically, Adagio asserts the court's conclusion that "the parties' course of conduct manifested their intention to be bound . . . was error" because "[t]he parties' contract specified that any modifications must be reduced to writing" and because inferences of contract modification based on any course of conduct ignore contrary evidence that Adagio intended that those additional invoices be paid "only as a gesture of good will to ease tensions and on a limited trial basis." (Cleaned up.)

A. Genuine Issue of Material Fact

1. Delaware Law on Contract Modification

¶9 Under Delaware law,^[5] contract formation depends on "whether a reasonable negotiator in the position of one asserting the existence of a contract would have concluded, in that setting, that the agreement reached constituted agreement on all of the terms that the parties themselves regarded as essential." Leeds v. First Allied Conn. Corp., 521 A.2d 1095, 1097 (Del. Ch. 1986); see also Sheets v. Quality Assured, Inc., No. N14C-03-010 VLM, 2014 WL 4941983, at *2 (Del. Super. Ct. Sept. 30, 2014) (stating that "[u]nder Delaware law, contract formation is a question of fact" and "[a] contract is formed when it is reasonable to conclude, based on the objective manifestations of assent and the surrounding circumstances," including the "course of dealing," "that the parties intended to be bound to their agreement on all essential terms"). "Any amendment to a contract, whether written or oral, relies on the presence of mutual assent . . . ." Continental Ins. Co. v. Rutledge & Co., 750 A.2d 1219, 1232 (Del. Ch. 2000).

¶10 Delaware courts have explained the meaning of mutual assent: "Manifestation of mutual assent is an external or objective standard for interpreting conduct. A party manifests an intention to be bound if he believes or has reason to believe that the promisee will infer that intention from his words or conduct." Schaeffer v. Lockwood, No. 2018-0926-MTZ, 2021 WL 5579050, at *16 (Del. Ch. Nov. 30, 2021) (cleaned up).^[6] Further, "mutual assent means the external expression of intention as distinguished from undisclosed intention." Id. (cleaned up). Thus, a "court determines whether there has been mutual assent based upon the parties' expressed words and deeds as manifested at the time rather than by their after-the-fact professed subjective intent." Id. (cleaned up).

¶11 A "prohibition against amendment except by written change may be waived or modified in the same way in which any other provision of a written agreement may be waived or modified, including a change in the provisions of the written agreement by [the] course of conduct of the parties." Pepsi-Cola Bottling Co. of Asbury Park v. Pepsico Inc., 297 A.2d 28, 33 (Del. 1972). "[P]arties have a right to renounce or amend the agreement in any way they see fit and by any mode of expression they see fit. They may, by their conduct, substitute a new oral contract without a formal abrogation of the written agreement." Id.; see also id. (finding contract...