Mid-Am. Salt, LLC v. Bob & Dave's Lawn & Landscape Maint., Inc.
| Decision Date | 16 September 2019 |
| Docket Number | Cause No. 1:16-CV-285-HAB |
| Parties | MID-AMERICAN SALT, LLC f/k/a MIDWEST SALT OF FORT WAYNE, LLC, Plaintiff, v. BOB & DAVE'S LAWN AND LANDSCAPE MAINTENANCE, INC., d/b/a MIDWEST MELT SOLUTIONS, Defendant. |
| Court | U.S. District Court — Northern District of Indiana |
This case presents yet another illustrative example of the seemingly self-evident proposition that seven-figure business transactions should be preceded by a written and signed contract. Here, Plaintiff Mid-American Salt, LLC, f/k/a Midwest Salt of Fort Wayne ("Seller") initiated its performance of a more than two-million-dollar transaction for the sale of Moroccan salt without first having a signed contract from Defendant Bob & Dave's Lawn and Landscape Maintenance, Inc. d/b/a/ Midwest Melt Solutions ("Buyer"). When the transaction ultimately fell through, Buyer claimed that it was not liable because no contract existed. Buyer now moves for summary judgment1 on Seller's claim for damages, asserting: (1) that the contract fails for lack of a condition precedent; and (2) Seller cannot prove damages from the alleged breach in any event. Seller counters that parol evidence defeats Midwest's interpretation of the contract, and furtherthat there is sufficient evidence of its damages to require a trial. Because the Court finds that genuine issues of material fact exist, Buyer's Motion for Summary Judgment will be denied.
Buyer is a landscaping company located in Wisconsin. A significant part of Buyer's business is snow removal, both providing snow removal services on its own and selling bulk rock salt to other snow removal companies. Generally, Buyer had been able to meet its salt demand through domestic suppliers such as Morton and Cargill. However, in the summer of 2014, it became clear that domestic suppliers would not be able to meet the demand for rock salt in the Great Lakes area. Accordingly, Buyer sought out alternative sources of salt.
Buyer ultimately turned to Seller. Seller had access to salt from Morocco through its Spanish supplier, Pardira Premium S.L. ("Pardira"). This was the first time that Buyer had done business with Seller. Buyer's order was in excess of 24,000 tons, which was Buyer's largest salt order in the history of the business.
The parties agree that the contract for the salt purchase was the subject of extensive negotiation. Relevant to the current dispute are the negotiations regarding paragraph 10. Seller's initial draft contained the following provision:
10. This agreement will be effective upon [Buyer] and [Seller's] signing of this Agreement document and monies being transferred in accordance with this Agreement. Delivery timing will be provided upon confirmation of this agreement.
Buyer had its attorney review and propose significant changes to Seller's draft. One of those changes was to strike the language "and monies being transferred in accordance with this Agreement" from paragraph 10.
By August 2014 market conditions were such that any further delay in consummating the agreement would cost both sides additional money. On August 7, 2014, Seller sent another draftagreement to Buyer, emphasizing that a "fast decision" was needed. Buyer orally confirmed its agreement to Seller's most recent draft the same day, and Seller confirmed that the transaction would proceed via email. Seller then took the necessary steps to mobilize the shipment of the sale, which included wiring approximately $700,000.00 to Pardira. Seller forwarded an "updated" agreement to Buyer the next day, although it appears that the August 7 and August 8 documents are substantively the same.
Several days passed without Buyer returning a signed copy of the agreement. On August 11, 2014, Seller reached out to Buyer to inquire as to the status of the contract. A text message exchange occurred between representatives of the parties in which Buyer stated, "we have a commitment so don't worry." (ECF No. 49-1 at 113-16). Buyer further promised to provide a signed copy of the agreement the next day. True to its promise, Buyer did provide a signed copy of the agreement (Id. at 19) (the "Agreement") and requested Seller's wiring instructions so that the required down payment could be made. Notably, the only substantive change to the Agreement from the initial draft proposed by Seller was a handwritten provision regarding title to the salt. The rest of the provisions, including paragraph 10, remained the same.
Unbeknownst to Seller, Buyer was purchasing the salt not for its own use but instead to re-sell to a third party. Sometime between August 12 and August 19, 2014, Buyer's resale arrangement broke down. As a result, Buyer informed Seller on August 19, 2014, that it would not be purchasing the salt as agreed. Seller attempted to find another purchaser for the salt but was unable to do so. Seller was ultimately forced to cancel the shipment from Pardira. Seller maintains that, as a result, it lost the entire profit that it expected to realize from the sale of the salt, approximately $561,000.00.
Summary judgment is warranted when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The non-moving party must marshal and present the Court with evidence on which a reasonable jury could rely to find in their favor. Goodman v. Nat'l Sec. Agency, Inc., 621 F.3d 651, 654 (7th Cir. 2010). A court must deny a motion for summary judgment when the nonmoving party presents admissible evidence that creates a genuine issue of material fact. Luster v. Ill. Dep't of Corrs., 652 F.3d 726, 731 (7th Cir. 2011) (citations omitted). A court's role in deciding a motion for summary judgment Waldridge v. Am. Heochst Corp., 24 F.3d 918, 920 (7th Cir. 1994).
Facts that are outcome determinative under the applicable law are material for summary judgment purposes. Smith ex rel. Smith v. Severn, 129 F.3d 419, 427 (7th Cir. 1997). Although a bare contention that an issue of material fact exists is insufficient to create a factual dispute, a court must construe all facts in a light most favorable to the nonmoving party, view all reasonable inferences in that party's favor, Bellaver v. Quanex Corp., 200 F.3d 485, 491-92 (7th Cir. 2000), and avoid "the temptation to decide which party's version of the facts is more likely true," Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003). Additionally, a court is not "obliged to research and construct legal arguments for parties, especially when they are represented by counsel." Nelson v. Napolitano, 657 F.3d 586, 590 (7th Cir. 2011).
As a threshold issue, the Court must determine the appropriate law to apply given the diversity of citizenship among the parties. On August 21, 2019, the Court issued an Order (ECF No. 53) asking the parties to address the choice of law issue in this case, particularly the issue of whether a choice of law provision could be enforced when the validity of the contract containing the choice of law provision was at issue. The parties timely submitted their briefs on the matter. (ECF No. 55, 57). The Court thanks the parties for their well-researched and written submissions.
Both parties rely on Life Plans v. Sec. Life of Denver Ins. Co., 800 F.3d 343 (7th Cir. 2015), in concluding that Indiana law applies. In Life Plans, the Seventh Circuit stated, "[e]ven if one party to the contract alleges the failure of a condition precedent, we apply the law chosen by the parties to all contractual issues." Id. at 357. This sentence would appear to be determinative here, since the primary defense to the contract raised by Buyer is that of the failure of a condition precedent. But the Court is not so sure.
When a federal court hears a case in diversity, it applies the choice-of-law rules of the forum state to determine which state's substantive law applies. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Life Plans, a case initially decided by a district court sitting in Illinois, relied on Smurfit Newsprint Corp. v. Southeast Paper Mfg., 368 F.3d 944 (7th Cir. 2004), for the choice of law statement cited above. Smurfit was also initially decided by a district court sitting in Illinois and relies entirely on Illinois law in making its choice of law determination. Id. at 949. Therefore, it is possible, if not likely, that the statement of Life Plans is binding precedent only for those cases where Illinois is the forum state.
Thankfully, the issue has been rendered moot by the parties' choice of law submissions. Federal courts "honor reasonable choice-of-law stipulations in contract cases regardless of whethersuch stipulations are made formally or informally, in writing or orally." Auto-Owners Ins. Co. v. Websolv Computing, Inc., 580 F.3d 543, 547 (7th Cir. 2009). In their choice of law submissions, both parties assert that Indiana law applies to this case. For the reasons stated in those submissions the Court finds the parties agreement on this point reasonable and will apply Indiana law to this dispute.
While the nominal dispute before the Court is the enforceability of the Agreement, the parties' briefing focuses on the issue of parol evidence. Both parties agree that the parol evidence question is governed by Indiana's codification of the Uniform Commercial Code, Ind. Code § 36-1-2-202. That statute states:
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