Jacobson Warehouse Co. v. Schnuck Mkts., 20-1595

CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)
Writing for the CourtKELLY, Circuit Judge.
PartiesJacobson Warehouse Co., Inc., doing business as XPO Logistics Supply Chain Plaintiff - Appellee v. Schnuck Markets, Inc. Defendant-Appellant Jacobson Warehouse Co., Inc., doing business as XPO Logistics Supply Chain Plaintiff - Appellant v. Schnuck Markets, Inc. Defendant-Appellee
Docket Number20-1595,20-1690
Decision Date07 September 2021

Jacobson Warehouse Co., Inc., doing business as XPO Logistics Supply Chain Plaintiff - Appellee

Schnuck Markets, Inc.

Jacobson Warehouse Co., Inc., doing business as XPO Logistics Supply Chain Plaintiff - Appellant

Schnuck Markets, Inc.

Nos. 20-1595, 20-1690

United States Court of Appeals, Eighth Circuit

September 7, 2021

Submitted: April 14, 2021

Appeals from United States District Court for the Eastern District of Missouri - St. Louis

Before KELLY, GRASZ, and KOBES, Circuit Judges.

KELLY, Circuit Judge.

This breach of contract and tort dispute arises from a business relationship between a regional supermarket chain and a logistics company that managed one of its distribution centers. Defendant, Schnuck Markets, Inc. (SMI), and Plaintiff, Jacobson Warehouse Company, Inc. d/b/a XPO Logistics Supply Chain (XPO), cross-appeal parts of the district court's[1] orders and judgment. Having jurisdiction under 28 U.S.C. § 1291, we affirm.

I. Background

SMI is a supermarket retailer that owns and operates "Schnucks" branded grocery stores across Missouri, Illinois, Indiana, Iowa, and Wisconsin. XPO is a global logistics company that, among other things, provides warehouse management and related logistical services to clients. Effective May 1, 2015, XPO and SMI entered into an Amended and Restated Operating Agreement (the Agreement) that set forth the terms and conditions under which XPO would provide certain warehouse management services for a new distribution center (Northpark) that SMI was planning to utilize. Previously, SMI had used three distribution centers in and around St. Louis, Missouri, to provide perishable and non-perishable groceries to Schnucks stores in the surrounding area. With XPO managing Northpark, SMI planned to transition the majority of its warehousing and distribution services to Northpark when the facility was ready.

XPO began providing warehouse management services at Northpark in July 2016, during which time SMI transferred large amounts of inventory from its other warehouses to Northpark. Almost immediately, Northpark began to experience operational issues, including with its receipt of fresh produce from another warehouse and its shipping of food to Schnucks stores. According to SMI, XPO's mismanagement of this transition period resulted in the loss of or damage to substantial amounts of inventory, often when pallets of food were improperly stored within Northpark or left to spoil on the distribution center's docks, as well as diminished sales at local Schnucks stores (whose inventories were consequently reduced). And SMI incurred additional expenses to mitigate the severity of the situation (e.g., temporarily moving inventory back to SMI's other warehouses, implementing promotional deals to retain grocery store shoppers). Although this "crisis" was largely resolved within a few weeks, SMI claims that XPO continued to mismanage Northpark, resulting in additional lost or damaged inventory and XPO running substantially over budget. Several months into XPO's management of Northpark, SMI demanded that XPO reimburse SMI for the losses XPO allegedly caused and began withholding payments from XPO.

On February 17, 2017, XPO sued SMI, claiming among other things that SMI had breached the Agreement and unlawfully withheld payments for properly performed warehouse management services. SMI counterclaimed, alleging among other things that XPO had breached the Agreement and negligently managed Northpark. In a contentious litigation, the parties proceeded through discovery and pre-trial motions practice to trial. At the conclusion of a ten-day trial, the jury rendered its verdict, awarding $3, 650, 526.38 (as modified by post-trial orders granting pre-trial interest and offset) to XPO on its action on account claim, and awarding $147, 000 to SMI on its breach of contract claim. The district court considered and decided the parties' post-trial motions, and the parties now cross-appeal.

II. SMI's Arguments on Appeal

A. Dismissal of SMI's Counterclaims for Non-Direct Damages Under Section 5(b) of the Agreement.

First, SMI argues that the district court erred by misinterpreting Section 5(b) of the Agreement to dismiss SMI's breach of contract, breach of the covenant of good faith and fair dealing, negligence, fraud, and conversion claims to the extent they sought damages other than direct damages (e.g., incidental, consequential, indirect, special, or punitive damages).[2] We review de novo the district court's grant of a motion to dismiss and grant of a motion for judgment on the pleadings, "accepting the facts alleged in the complaint as true and drawing all reasonable inferences in favor of the nonmovant." Pietoso, Inc. v. Republic Servs., Inc., 4 F.4th 620, 622 (8th Cir. 2021); see Gallagher v. City of Clayton, 699 F.3d 1013, 1016 (8th Cir. 2012). To survive either motion, the "complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Gallagher, 699 F.3d at 1016 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

Under Missouri law, [3] "[t]he construction and interpretation of a contract is a matter of law," and we pay no deference to the trial court's interpretation. Sligo, Inc. v. Nevois, 84 F.3d 1014, 1019 (8th Cir. 1996). "The cardinal principle of contract interpretation is to ascertain the intention of the parties and to give effect to that intent." J.H. Berra Constr. Co. v. City of Washington, 510 S.W.3d 871, 874 (Mo.Ct.App. 2017) (quoting Dunn Indus. Grp., Inc. v. City of Sugar Creek, 112 S.W.3d 421, 428 (Mo. banc 2003)). A contract is unambiguous when it "uses plain and unequivocal language," in which case we enforce it as written. Deal v. Consumer Programs, Inc., 470 F.3d 1225, 1230 (8th Cir. 2006). A contract is ambiguous, on the other hand, when "its terms can be genuinely and reasonably construed in more than one way." J.H. Berra Constr., 510 S.W.3d at 874. "To determine whether a contract is ambiguous, we consider the instrument as a whole, giving the words contained therein their ordinary meaning." Deal, 470 F.3d at 1230. "A contract is not ambiguous merely because the parties dispute its meaning." Id.

The parties' dispute centers on their varying interpretations of Section 5(b) of the Agreement, which provides in pertinent part:

[1] Subject to its applicable insurance limit(s), each party shall indemnify and hold the other and its representatives harmless from and against all claims, liabilities, losses damages and expenses (including reasonable attorneys' fees and expenses) incurred or suffered by any of them as a result of or in connection with (i) any breach of any of their respective obligations under this Agreement or (ii) the negligence or willful misconduct of the indemnifying party or its representatives. [2] In addition, XPO shall defend indemnify and hold [SMI] harmless from and against all claims, liabilities, losses, damages and expenses made and/or assessed by the landlord of the Facility (including reasonable attorneys' fees and expenses) and incurred or suffered by [SMI] and its representatives as a result of or in connection with XPO's breach of this Agreement willful misconduct, negligent acts or negligent omissions. . . . [4] Except for their respective indemnification obligations hereunder, as limited herein, unless otherwise prohibited by law, neither party shall be liable for incidental or consequential damages or indirect, special or punitive damages.

Agreement § 5(b). Both parties argue that Section 5(b) is unambiguous, but they disagree as to its meaning. SMI focuses on the first sentence of Section 5(b) (the Indemnification Provision). That provision, according to SMI, creates first-party indemnification obligations that are not subject to the damages limitations set forth in the fourth sentence of Section 5(b) (the Limitation of Liability Provision). In contrast, XPO argues that the Indemnification Provision creates only third-party indemnification obligations. Thus, under XPO's view, the Limitation of Liability Provision limits either party's exposure to first-party claims solely to direct damages.

Having carefully examined the language of Section 5(b) and the Agreement as a whole, we conclude that Section 5(b) unambiguously bars SMI from recovering non-direct damages from XPO. Setting aside the prefatory clause for a moment, the Limitation of Liability Provision clearly provides, "unless otherwise prohibited by law, neither party shall be liable for incidental or consequential damages or indirect, special or punitive damages." This language does not purport to cabin the types of claims to which the limitation applies (e.g., first- vs. third-party claims, contract vs. tort claims).[4]

SMI nevertheless focuses on the Limitation of Liability Provision's prefatory clause-"[e]xcept for their respective indemnification obligations hereunder, as limited herein"-to argue that it is not limited to recovering direct damages in this case. SMI asserts that, pursuant to the Indemnification Provision, XPO has a first-party indemnification obligation to SMI, and that obligation is expressly excepted from the damages limitation. We disagree. Viewed in light of Missouri contract law and the whole Agreement, we read the Indemnification Provision to create only mutual third-party indemnification obligations for XPO and SMI.

To begin, we are conscious that "[i]ndemnity suits ordinarily arise in the context of third-party claims." Monarch Fire Prot. Dist. of St. Louis Cnty. v. Freedom Consulting &Auditing Servs., Inc., 644 F.3d 633, 638 (8th Cir. 2011). Although Missouri law does not limit indemnification to third-party claims, see Praetorian Ins. Co. v. Site Inspection, LLC, 604 F.3d 509, 516 (8th Cir. 2010), we look for "express language referencing litigation...

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