Noah's Ark Processors, LLC v. Unifirst Corp.

• Decision Date: 11 February 2022
• Docket Number: S-21-086.
• Citation: 970 N.W.2d 72,310 Neb. 896
• Parties: NOAH'S ARK PROCESSORS, LLC, a Minnesota limited liability company, appellant, v. UNIFIRST CORPORATION, a Massachusetts corporation, appellee.
• Court: Nebraska Supreme Court

310 Neb. 896

970 N.W.2d 72

NOAH'S ARK PROCESSORS, LLC, a Minnesota limited liability company, appellant,

v.UNIFIRST CORPORATION, a Massachusetts corporation, appellee.

No. S-21-086.

Supreme Court of Nebraska.

Filed February 11, 2022

W. Patrick Betterman, Omaha, P.C., L.L.O., for appellant.

Max Kelch and Matt Davis, for appellee.

Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, Papik, and Freudenberg, JJ.

Funke, J. Noah's Ark Processors, LLC (Noah's), notified UniFirst Corporation (UniFirst) that it was terminating their business agreement. Pursuant to an arbitration clause, UniFirst commenced an arbitration proceeding against Noah's seeking damages. Noah's sought a declaration in district court that because Noah's was not a signatory to the agreement, Noah's was not bound by the agreement or the arbitration provision. Following a bench trial, the court dismissed the complaint of Noah's, determined that Noah's was equitably estopped from contesting that it is bound by the agreement and arbitration provision, and directed Noah's to participate in arbitration.

Noah's appeals. The appeal is without merit. We affirm.

BACKGROUND

UniFirst, a Massachusetts corporation, is a supplier of industrial worker uniforms. Nebraska Prime Group LLC (Prime) is a Nebraska limited liability company, which operated a meatpacking business in Hastings, Nebraska. In 2013, UniFirst and Prime entered into a customer service agreement (CSA), under which UniFirst agreed to provide uniforms and related services for Prime's meatpacking business. The initial term of the CSA was 60 months, through April 2018, and then on a month-to-month basis thereafter. The CSA included separate line items with pricing and stated, "The Customer orders from [UniFirst] for all of Customer's requirements for garments and other items (‘Merchandise’) of the type listed on the reverse, at the prices and upon the terms and conditions outlined. Additional Merchandise requested by Customer, verbally or in writing, will also be covered by this Agreement." The CSA required arbitration for "[a]ll disputes of whatever kind between Customer and UniFirst." The CSA stated, "Customer agrees that in the event it sells or transfers its business, it will require the purchaser or transferee to assume all obligations and responsibilities under this Agreement."

Noah's is a Minnesota limited liability company doing business in Omaha, Nebraska. In 2014, through foreclosure of a lien, Noah's acquired Prime's assets, including the meatpacking operation. Prime continued its operations at the plant until January 1, 2015. On January 2, Noah's took possession of the property and began operating the plant and assets for its own account. UniFirst continued to provide services to the plant under the CSA, until January 2018, when Noah's issued a termination letter.

In June 2018, UniFirst filed an arbitration demand against Noah's, seeking $141,054.01 in damages and requesting that the arbitration occur in Topeka, Kansas. In September, Noah's filed a complaint in the district court for Douglas County, Nebraska, seeking a declaration that the CSA is not binding against it and a determination of any balance due to UniFirst under an oral arrangement. UniFirst filed an answer denying the allegations and asserting affirmative defenses that (1) Noah's ratified the CSA, (2) Noah's continued Prime's operation of the plant business and utilization of services under the CSA, and (3) Noah's was estopped from denying the existence of a valid contract.

Noah's moved for summary judgment, arguing that it was not bound by the CSA or, in the alternative, that UniFirst had waived its right to arbitration. The court granted the motion of Noah's with respect to UniFirst's ratification and successor liability affirmative defenses, but denied the motion as to the equitable estoppel affirmative defense, finding genuine issues of material fact.

Although acknowledging that Noah's was not a signatory to the CSA, the court found UniFirst had presented evidence from which a jury could conclude that the conduct of Noah's "on several instances" amounted to false representations, concealment of material facts, or representations calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which Noah's subsequently attempted to assert. The court found no merit to the argument of Noah's that an equitable estoppel defense requires a party to prove the elements of fraud and deception. The court found no merit to the argument of Noah's that UniFirst had waived its right to arbitration. The court found UniFirst had acted consistently with its arbitration right and found no evidence of any prejudice to Noah's.

The court held a bench trial in October 2020. In its posttrial order, the court found that UniFirst had established the elements for its equitable estoppel claim, and the court again found no evidence of a waiver. The court found no merit to the argument of Noah's that UniFirst had failed to plead its estoppel theory, explaining UniFirst had asserted equitable estoppel as an affirmative defense in answers to the first and second amended complaint of Noah's.

In analyzing the elements of equitable estoppel based upon the trial evidence, the court found:

When [Noah's] took over operation of the plant on or about January 2, 2015, neither [Noah's] nor Prime notified [UniFirst] that [Noah's] had assumed operation of the plant, and [UniFirst] believed it was continuing to do business with Prime. There is no evidence that [UniFirst] entered into any oral agreement with [Noah's] at any time before the [CSA] was terminated by [Noah's]. [UniFirst] was not aware that [Noah's] existed, and [Noah's] did nothing to give notice to [UniFirst] as to the change in the ownership of the plant in January, 2015.

The court found that after Noah's acquired the plant, management at the plant did not change, which meant that UniFirst's contacts at the plant were the same as under Prime—at the same business phone numbers and email addresses. The court found that in a phone call with UniFirst in 2016, a plant employee had referred to the business as "WR Reserve" and assured that WR Reserve and Prime were the same entity. In addition, the court found that from August 2017 to January 2018, UniFirst submitted "233 invoices ... to ‘Nebraska Prime’ " for services provided under the CSA. The court found as follows: All of the invoices were paid on a regular basis; UniFirst was never advised the invoices were incorrectly titled; and at the time the CSA was terminated, there was an outstanding balance due to UniFirst.

The record showed that because the original term of the CSA would expire in 2018, UniFirst proposed a new contract in September 2017 with the entity referred to as "Nebraska Prime/WR Reserve" and was not advised that the proposed contract named an incorrect entity. In a followup conversation, Noah's acknowledged to UniFirst that the current CSA would remain effective for 2 years.

There were several occasions between 2015 and 2018 wherein UniFirst requested and received performance evaluations from the company named "Nebraska Prime," and UniFirst was not notified of the incorrect name for the company. Lastly, the court found when Noah's terminated the CSA, it sought to do so for cause based upon several CSA provisions, which the court found was an acknowledgment by Noah's that it believed it was bound by the CSA.

Regarding UniFirst's equitable estoppel claim, the court ultimately found that the conduct of Noah's amounted to a false representation or concealment of the fact that it had become UniFirst's customer under the CSA, with the expectation that UniFirst would rely on the misrepresentation, that UniFirst was unaware Noah's had become its customer under the CSA, and that UniFirst had relied in good faith, to its detriment, on the conduct of Noah's. The court found that in reliance on the CSA, UniFirst continued to invest in the operation of Noah's by taking new orders and adding a new service route. The court therefore concluded that UniFirst had established the essential elements of equitable estoppel and that Noah's was estopped from denying the binding authority of the CSA. The court lifted a stipulated stay of the arbitration proceedings and directed Noah's to participate in arbitration.

Noah's moved to alter or amend, arguing, inter alia, the court's estoppel ruling did not address the question of whether the parties’ billing disputes over certain items were within the scope of the CSA's arbitration provision. Noah's argued that its alleged liability was for certain garments not included within the CSA and was an issue for the court to decide and not the arbitrator. The court summarily overruled the motion to alter or amend.

Noah's appeals. We moved the case to our docket upon our own motion.

ASSIGNMENTS OF ERROR

Noah's assigns, summarized and restated, that the district court erred in (1) finding that Noah's was equitably estopped from disputing that it is bound by the CSA and arbitration provision; (2) failing to find part of the parties’ billing dispute to be outside the scope of the arbitration agreement; (3) failing to determine the amounts owed to UniFirst for garments, if any; (4) deciding the issue of equitable estoppel when it was not pled; and (5) admitting hearsay evidence.

The brief of Noah's included further assignments of error. However, at oral argument, Noah's agreed that these assignments of error were based on dictum in the trial court's order and that it is not necessary to address that aspect of the appeal to fully resolve this case. An appellate court is not obligated to engage in an analysis that is not necessary to adjudicate the case and controversy before it.¹

STANDARD OF REVIEW

Whether a stay of proceedings should be granted and arbitration required is a question of law.² When reviewing questions of law, this court has an obligation to resolve the questions independently of the...