Leonetti's Frozen Foods, Inc. v. Rew Mktg., Inc., 17-1445

• Decision Date: 11 April 2018
• Docket Number: No. 17-1445,17-1445
• Citation: Leonetti's Frozen Foods, Inc. v. Rew Mktg., Inc., 887 F.3d 438 (8th Cir. 2018)
• Parties: LEONETTI'S FROZEN FOODS, INC., Plaintiff-Appellant v. REW MARKETING, INC., Defendant Crew, Inc., doing business as Rew Marketing, Inc., Defendant-Appellee
• Court: U.S. Court of Appeals — Eighth Circuit

887 F.3d 438

LEONETTI'S FROZEN FOODS, INC., Plaintiff-Appellant

v.REW MARKETING, INC., Defendant

Crew, Inc., doing business as Rew Marketing, Inc., Defendant-Appellee

No. 17-1445

United States Court of Appeals, Eighth Circuit.

Submitted: February 14, 2018

Filed: April 11, 2018

Vincent N. Barbera, Justin E. Proper, WHITE & WILLIAMS, Philadelphia, PA, for Plaintiff-Appellant.

David Michael Donovan, Richard N. Watts, WATTS & DONOVAN, Little Rock, AR, for Defendant-Appellee.

Before LOKEN, BENTON, and ERICKSON, Circuit Judges.

ERICKSON, Circuit Judge.

In 2014, Leonetti's Frozen Foods, Inc. hired Crew, Inc. to market and sell stromboli products to Sam's Club.One of these products was intended for sale in Sam's Club's in-store cafes.The in-store café product needed to be reformulated so that it could be heated in Sam's Club's impinger pizza ovens.Leonetti's worked for months to ensure that the café stromboli met Sam's Club's stringent requirements, which demanded that the stromboli pass two crucial tests.Leonetti's eventually succeeded in passing the two tests.Shortly after receiving news that the stromboli passed the tests and reviewing photographs of the testing, Crew President Jeff Campigli inadvertently sent a reply-all email that expressed his pleasure that the testing had gone so well.In the email, Campigli suggested that some of the photographs were so good they could be used to market the product to Costco, Sam's Club's primary competitor.The following month, Sam's Club terminated discussions with Leonetti's.

Leonetti's filed an action against Crew, asserting that the email caused Sam's Club to decline to purchase Leonetti's stromboli products.The district court, having jurisdiction under 28 U.S.C. § 1332(a)(1), granted summary judgment against Leonetti's on all counts but one.On appeal, jurisdiction is proper in this court under 28 U.S.C. § 1291.For the reasons stated below, we reverse.

I.

Leonetti's is in the business of developing and manufacturing a variety of frozen food products.In August 2014, Leonetti's and Sam's Club began discussing the possible purchase of two stromboli products: "Leonetti's Frozen Stromboli" and "Café Stromboli."Leonetti's hired Crew as a broker for the testing and approval process.Crew was already Leonetti's broker for Costco.

Leonetti's needed to reformulate its pepperoni and provolone cheese Café Stromboli to meet Sam's Club's requirements—which were being driven by the impinger ovens that Sam's Club uses to heat its pizza products.In essence Sam's Club required the stromboli product to pass both a temperature test and a hold test before it would be willing to purchase the stromboli for resale.The testing process began in late September 2014.It is undisputed that during October and November 2014 Leonetti's struggled to achieve the requisite internal temperature (at least 135 degrees) without burning the stromboli or having cold pockets inside the stromboli.

Leonetti's successfully reformulated the stromboli by changing the dough and surface area.By early December 2014, Sam's Club Senior Vice President Shawn Baldwin told Leonetti's co-owner Robert Ippaso that Leonetti's had made substantial progress, writing, "John [Hawthorne, the café buyer for Sam's Club,] told me that you are getting close on the Stromboli heating evenly [t]o a point we can test and sell some soon."The stromboli met Sam's Club's internal-temperature benchmark in tests conducted during the week of December 7, 2014, and on December 16, 2014.

That same day, Hawthorne requested that Leonetti's develop a ham and pepperoni stromboli to sell in addition to the pepperoni and provolone stromboli.Crew Chief Executive Officer Cindy Romines-Towler told Leonetti's that after the holidays, the ham and pepperoni product would undergo temperature tests, the pepperoni and provolone product would undergo a hold test, and if the latter passed the hold test, the parties would "move forward."On January 13, 2015, the ham and pepperoni stromboli failed a temperature test, and Hawthorne concluded that the original pepperoni and provolone stromboli was better.

On January 14, 2015, the pepperoni and provolone stromboli passed temperature and hold tests.That day, Romines-Towler emailed Hawthorne to report the favorable results:

John and Jeremy good day!I completed the in-club testing this morning at the Bentonville Sam's Club.Test went extremely well.I used 8 Stromboli's in the test.The additional samples were used to determine where to start the pans as the temperature and times were not set at 485*—6 minutes.The ovens were set at 500*—6:30, club associate said they started the pizzas at the entrance of the oven and recommended we do the same.I found that the top oven cooked hotter than the 2nd and 3rd oven.While the top oven did not burn the Stromboli they were a little darker than we like to have.

Attached is a recap of the testing.

Please let me know if you have any questions and what our next steps will be.

Minutes later, Campigli, who was blind copied on Romines-Towler's email, hit reply all and sent the following email (the "Costco email"): "Nice job Cindy.Robert [Ippaso] and I could even use slides 2-5 in our Costco Presentation next week :)."

Hawthorne responded, "I believe we received this note in error.Please be advised, I have not forwarded it and it will be deleted.Thank you."Contrary to his representations, Hawthorne did not delete the email, instead forwarding it to his boss, Dennis Horn, saying: "So this is interesting....... and obviously not something meant for us."

Ippaso replied to Hawthorne, thanking him for his understanding and admitting that Leonetti's was invited the previous year to present a different product to Costco.Hawthorne did not respond but instead forwarded the email to Horn commenting, "I believe this is the owner."The same day, Campigli sent an email apology to Hawthorne, who again did not reply but instead forwarded the email to Horn.

Hawthorne testified that he regarded the Costco email as a "grievous error" and that it would be "unethical" for Leonetti's to use slides documenting test results for a possible Sam's Club product in a presentation to Costco.Hawthorne acknowledged that Leonetti's sharing of the product that it developed exclusively for Sam's Club would be "a very serious issue."Hawthorne also testified that he considered the Costco email "a joke" and that he did not take it seriously.

Over the next three weeks, Romines-Towler tried unsuccessfully to contact Hawthorne both by phone and email.At his deposition, Hawthorne offered no reason for his failure to respond.Hawthorne did not make contact with Crew or Leonetti's until February 3, 2015.In the meantime, despite Hawthorne's original claims to the contrary, Leonetti's did not fail any further tests.

When Hawthorne finally got back to Romines-Towler, he did so in order to terminate Sam's Club's relationship with Leonetti's, sending an email stating:

Cindy,

We have tried and tried several revisions of this product.And to be honest, the very first version was the best.We did, as you know, have several temperature problems from day one.Cindy, you and your team are well aware of the efforts put forth.We battled cold pockets several times and a change in cheese (which lowered quality) and then finally get the temperature consistent.We tested on January 14 here in our kitchens and the bottoms burned.It would be an unacceptable product to put in front of the Members.Most importantly, we have not yet had a version of the Stromboli that I have found acceptable to take to a taste panel.

I would like to put this product on the shelf.We sincerely appreciate all your efforts and hard work to try and make this work.

Thank you, Cindy.Please let me know if you have any questions.

Consistent with this email, Hawthorne testified in his deposition that Sam's Club terminated the project development for performance issues and that the decision was uninfluenced by the Costco email.No document in Sam's Club's files indicates...