Pillsbury Co., Inc. v. Wells Dairy, Inc.

• Decision Date: 11 July 2008
• Docket Number: No. 06-1002.,06-1002.
• Citation: 752 N.W.2d 430
• Parties: The PILLSBURY COMPANY, INC., Appellant, v. WELLS DAIRY, INC., Appellee. Wells Dairy, Inc., Third-Party Plaintiff, v. American Industrial Refrigeration, Inc. and Refrigeration Valves and Systems Corporation, Third-Party Defendants.
• Court: Iowa Supreme Court

752 N.W.2d 430

The PILLSBURY COMPANY, INC., Appellant, v. WELLS DAIRY, INC., Appellee.

Wells Dairy, Inc., Third-Party Plaintiff, v. American Industrial Refrigeration, Inc. and Refrigeration Valves and Systems Corporation, Third-Party Defendants.

No. 06-1002.

Supreme Court of Iowa.

July 11, 2008.

Mark McCormick and Margaret C. Callahan of Belin Lamson McCormick Zumbach Flynn, P.C., Des Moines, William J. Cremer, Edmund J. Siegert, and Bradley M. Burd of Cremer, Kopon, Shaughnessy & Spina, L.L.C., Chicago, IL, and Daniel L. Hartnett and Marci L. Iseminger of Crary, Huff, Inkster, Sheehan, Ringgenberg, Hartnett & Storm, P.C., Sioux City, for appellant.

Juli Wilson Marshall, Mary Rose Alexander, Thomas J. Heiden, André M. Geverola, and Matthew J. Johnson of Latham & Watkins, L.L.P., Chicago, IL, Richard H. Moeller of Berenstein, Moore, Berenstein, Heffernan & Moeller, L.L.P., Sioux City, and Bruce Johnson of Cutler Law Firm, P.C., West Des Moines, for appellee.

WIGGINS, Justice.

The Pillsbury Company, Inc. appeals a district court ruling granting Wells Dairy Inc.'s motion for summary judgment dismissing Pillsbury's action on the grounds that Pillsbury was not the real party in interest and the force-majeure clause in the parties' production contract relieved Wells of performance. On our review of the record, we find that genuine issues of material fact exist as to whether Pillsbury is the real party in interest and that as a matter of law, under the production contract a force-majeure event must be beyond the reasonable control of Wells. Therefore, we reverse the district court judgment in favor of Wells and remand the case for further proceedings.

I. Background Facts and Proceedings.

On or about January 28, 1999, Pillsbury entered into a production contract with Wells for the production of Häagen-Dazs ice cream. On March 27 there was an explosion at Wells' south ice cream manufacturing facility in Le Mars. On August 18 Pillsbury entered into a Contribution and Assumption Agreement with Nestlé-USA Food Group, Inc. to form a joint venture called Ice Cream Partners USA, LLC (ICP). This agreement reflected the parties' intention to combine Nestlé's ice cream division assets and Pillsbury's Häagen-Dazs division assets. Pillsbury sent Wells a notice of assignment on October 20. In the notice, Pillsbury informed Wells that

the assignment is not, nor shall it be deemed to be, a waiver, release, or renunciation by Pillsbury, or by any of its agents or assignees, of any claims rights or remedies of Pillsbury relating in any way to the explosion that occurred at the Wells facility in Le Mars, Iowa in March 1999 and all subsequent events....

On July 17, 2000, Pillsbury filed a two-count petition against Wells in federal court under the name of its parent company, Diageo, PLC, requesting damages resulting from the explosion on theories of breach of contract and negligence. On August 30 Pillsbury filed an amended petition substituting itself as the plaintiff.

Wells filed an action in state court against various entities involved in the design and installation of its refrigeration system implicated in the explosion. Pillsbury agreed to voluntarily dismiss its federal suit so it could consolidate its action with Wells' pending state court action against the manufacturers of Wells' refrigeration system. On August 8, 2002, Pillsbury filed its two-count petition against Wells in state court alleging its breach of contract and negligence claims. On October 14 Wells answered Pillsbury's state court petition and raised the "force-majeure" clause of the production contract as an affirmative defense.

In December 2001 Nestlé acquired the fifty percent interest in ICP originally owned by Pillsbury and renamed the former joint venture NICC. In an agreement between Nestlé and Dreyer's Grand Ice Cream, Dreyer's acquired the assets relinquished by Pillsbury under the 1999 contribution agreement that formed ICP with Nestlé.

Over the course of the proceedings, the district court ruled on three motions for summary judgment. On May 29, 2003, Wells filed its first motion for summary judgment arguing the force-majeure clause contained in the 1999 production contract between Wells and Pillsbury excused Wells' inability to perform. In ruling on this motion the court held the force-majeure clause was susceptible to more than one interpretation and ordered the discovery of extrinsic evidence on the issue.

After the parties completed their discovery on the issue, Wells filed a second motion for summary judgment. Again, Wells argued the force-majeure clause excused Wells' inability to perform. Finally, Wells filed a third motion for summary judgment arguing Pillsbury had no standing to assert its claims against Wells because it had assigned its interest in the cause of action to ICP.

The court found the force-majeure clause relieved Wells from performing under the production contract and sustained Wells' second motion for summary judgment on this ground. The district court dropped Wells' standing argument and treated it as an argument that Pillsbury was not the real party in interest to pursue the action against Wells. The district court sustained Wells' motion by holding Pillsbury was not the real party in interest because it had assigned its interest in the cause of action against Wells to ICP. Accordingly, the district court gave Pillsbury two weeks to join or substitute the real party in interest or the court would dismiss the lawsuit.

Pillsbury attempted to comply with the court's order by substituting Zurich, its insurer, as the plaintiff. Wells resisted the attempt to allow Zurich to proceed with the action. The court sustained Wells' resistance, dismissed the action, and entered judgment in favor of Wells.

Pillsbury appeals. We will set out additional facts as they relate to the issues.

II. Issues.

In this appeal, we must decide if the district court correctly determined Pillsbury is not a proper party to the action and if the force-majeure clause of the Wells/Pillsbury production contract relieved Wells from performing under the contract.

III. Scope of Review.

We review a district court's ruling on a motion for summary judgment for correction of errors at law. Kragnes v. City of Des Moines, 714 N.W.2d 632, 637 (Iowa 2006). Summary judgment is appropriate only if the record shows there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Iowa R. Civ. P. 1.981. The appellate court's review is therefore limited to whether a genuine issue of material fact exists and whether the district court correctly applied the law. City of Cedar Rapids v. James Props., Inc., 701 N.W.2d 673, 675 (Iowa 2005).

The burden of showing the nonexistence of a material fact is upon the moving party. Clinkscales v. Nelson Sec. Inc., 697 N.W.2d 836, 841 (Iowa 2005). Every legitimate inference that can be reasonably deduced from the evidence should be afforded to the nonmoving party, and a fact question is generated if reasonable minds can differ on how the issue should be resolved. Kragnes, 714 N.W.2d at 637.

IV. Proper Party.

A. Real Party in Interest Versus Standing. Wells' motion for summary judgment claimed Pillsbury had no standing to assert its claims against Wells because it had assigned its interest in the cause of action to ICP. The district court analyzed the issue as one of real party in interest. A party who has standing and the real party in interest are not one in the same.

Our court has not commented on the difference between standing and real party in interest, but several other courts have. For instance, the Supreme Court of Alabama explained the difference as follows:

We use the term "real party in interest," rather than "standing," for a reason. Although both parties and the trial court have blurred the issue by referring to [the plaintiff's] "standing," the question whether a party has standing to sue is distinct from whether he or she is the real party in interest. While the real-party-in-interest principle directs attention to whether the plaintiff has a significant interest in the particular action he or she has instituted, standing requires that the person demonstrate an injury to a legally protected right. Here, [the plaintiff] has standing to sue because [the defendant's] alleged breach of contract injured her, not the bankruptcy trustee.

Ex Parte Sterilite Corp. of Alabama, 837 So.2d 815, 818-19 (Ala.2002) (internal citations omitted) (emphasis in original). In Sterilite, the court never reached the issue of whether the plaintiff was the real party in interest because the defendant failed to object on those grounds. Id. at 819. However, in other cases, courts have held that simply because a party has standing, does not mean he or she is the real party in interest and vice versa. See, e.g., Hammes v. Brumley, 659 N.E.2d 1021, 1029-30 (Ind.1995).

In Hammes, the Indiana Supreme Court explained the difference between standing and real party in interest as follows:

Standing refers to the question of whether a party has an actual demonstrable injury for purposes of a lawsuit....

"In order to invoke a court's jurisdiction, a plaintiff must demonstrate a personal stake in the outcome of the lawsuit and must show that he or she has sustained or was in immediate danger of sustaining, some direct injury as a result of the conduct at issue."

A real party in interest, on the other hand, is the person who is the true owner of the right sought to be enforced.

Id. (quoting Higgins v. Hale, 476 N.E.2d 95, 101 (Ind.1985)). The court went on to hold that the bankrupt parties were not the real parties in interest, rather the trustees of their respective bankruptcy estates were. Id. at 1030. However, even though the parties were not the real parties in interest, they still had standing to sue because they suffered a demonstrable injury allegedly caused by the parties they were...