R & B Appliance Parts Inc. v. Amana Co.

• Decision Date: 13 June 2001
• Docket Number: No. 01-1090,01-1090
• Citation: R & B Appliance Parts Inc. v. Amana Co., 258 F.3d 783 (8th Cir. 2001)
• Parties: (8th Cir. 2001) R&B APPLIANCE PARTS, INC., DOING BUSINESS AS ADASEN DISTRIBUTING, APPELLEE, v. AMANA COMPANY, L.P., DOING BUSINESS AS AMANA APPLIANCES, APPELLANT. Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 783

258 F.3d 783 (8th Cir. 2001)

R&B APPLIANCE PARTS, INC., DOING BUSINESS AS ADASEN DISTRIBUTING, APPELLEE, v. AMANA COMPANY, L.P., DOING BUSINESS AS AMANA APPLIANCES, APPELLANT.

No. 01-1090

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Submitted: June 13, 2001

Filed: August 3, 2001

Appeal from the United States District Court for the Northern District of Iowa.

Before Loken, Hall,¹ and Morris Sheppard Arnold, Circuit Judges.

Morris Sheppard Arnold, Circuit Judge.

Amana Company, L.P., sued R&B Appliance Parts, Inc., for the price of items sold to R&B pursuant to a contract for microwave parts ("Microwave Agreement"). R&B counterclaimed, contending that Amana had breached an earlier contract (the "Distribution Agreement") by failing to repurchase portions of R&B's inventory. The district court granted Amana summary judgment on its claim, while a jury found for R&B on its counterclaim.

Amana filed post-verdict motions seeking judgment as a matter of law on the counterclaim and prejudgment interest at a rate of 18% on the judgment rendered for it on its claim. The district court denied the motion for judgment as a matter of law and granted prejudgment interest at a lower rate than Amana had requested. Amana appeals both decisions and we reverse both.

I.

In 1983, R&B and the Caloric Corporation signed the Distribution Agreement, which entitled R&B to distribute replacement parts for Caloric appliances. The Distribution Agreement provided that it would renew itself on a yearly basis "subject to the right of either [Caloric or R&B] to terminate [the] Agreement... upon sixty (60) days prior written notice, from the party electing to terminate," sent to the other party via certified mail. In the event that the agreement was terminated, Caloric obligated itself, "upon written request of [R&B] received by Caloric within thirty (30) days after the effective date of termination, [to] repurchase all of [R&B's] new functional replacement parts provided they [were] listed in Caloric's most recent replacement parts price list."

At the time that the Distribution Contract was signed, Caloric and Amana were separately-operated subsidiaries of Raytheon Appliances, Inc. The parties agree that the relationship went smoothly until 1992, when Raytheon consolidated its appliance subsidiaries into a single operation and Amana employees became responsible for the sale of Caloric parts. Amana and Caloric were fully merged under the Amana label in 1994.

Until 1992, R&B appears to have been unchallenged in the southwestern United States market for the distribution of Caloric parts. Once Amana became responsible for Caloric parts sales, however, it installed competing distributors in R&B's market. The resulting competition adversely affected R&B's sales, leaving it with a large unwanted inventory. In May 1992, R&B's president, Bob Burggraf, sent a letter to Amana suggesting that it "adjust[]" R&B's inventory by repurchasing half of that portion of the inventory comprised of Amana, Caloric, and other brand-name parts. Amana did not repurchase any inventory, and R&B continued to purchase Caloric parts from Amana for several more years.

II.

Amana maintains that it is entitled to judgment as a matter of law on R&B's claim that Mr. Burggraf's letter triggered the repurchase option in the Distribution Agreement. We review the district court's denial of judgment as a matter of law de novo, keeping in mind that "[p]ost-verdict judgment as a matter of law is appropriate only where the evidence is entirely insufficient to support the verdict." Belk v. City of Eldon, 228 F.3d 872, 877-78 (8th Cir. 2000), cert. denied, ___U.S.___, 121 S. Ct. 1734 (2001). As a federal court sitting in diversity, we apply Iowa law, the law of the forum, to this case.

For R&B to succeed on its breach of contract claim, it must show, in part, that all of the conditions precedent to Amana's repurchase obligation have occurred. See Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224 (Iowa 1998). Before Amana can be obligated to repurchase R&B's inventory, R&B must have terminated the Distribution Agreement and must have exercised the option. Amana vigorously disputes that either of these conditions occurred. We need not determine whether the option was exercised, however, because we hold that as a matter of law the Distribution Agreement was never terminated.

In order to terminate the agreement, R&B had to follow the provisions of the agreement relevant to termination, as "[t]he rule is quite universal that such cancellation at the will or demand of one of the parties without the consent of the other can be effected only by strict compliance with such terms and conditions" as are contained within the agreement. Artificial Ice Co. v. Reciprocal Exchange, 184 N.W. 756, 759 (Iowa 1921). The Distribution Agreement provides that it could be terminated by means of a written notice sent by certified mail, and the parties agree that such notice was never sent. Under these circumstances, it is plain as a matter of law that the agreement was not terminated.

R&B contends that, although the contractual prerequisites for termination of the Distribution Agreement did not occur, the jury could nevertheless find that the Distribution Agreement terminated. Mr. Burggraf testified at trial that he believed that the Distribution Agreement terminated when Amana took over the sale of Caloric parts. This takeover, however, resulted from Caloric's delegation to Amana of its duty under the Distribution Agreement to provide Caloric parts to R&B. A party to a contract is permitted to delegate its duty of performance to a third party unless the contract specifically provides otherwise, or unless "the other party has a substantial interest in having the original promisor perform or control the acts required by the contract." Iowa Code Ann. § 554.2210.1; see also Restatement (Second) of Contracts § 318 cmt. a. Nothing in the Distribution Agreement prevented Caloric from delegating its duties under the agreement to Amana, and R&B had no substantial interest in having Caloric, rather than Amana, perform the contract. R&B therefore cannot cite this delegation as evidence that the agreement had terminated.

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