Southern Wine v. Mountain Valley Spring Co. Llc

• Citation: 646 F.3d 526,80 Fed.R.Serv.3d 298
• Decision Date: 19 July 2011
• Docket Number: No. 10–2718.,10–2718.
• Parties: SOUTHERN WINE AND SPIRITS OF NEVADA, A Division of Southern Wine and Spirits of America, Inc., Appellee,v.MOUNTAIN VALLEY SPRING COMPANY, LLC, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

646 F.3d 526

80 Fed.R.Serv.3d 298

SOUTHERN WINE AND SPIRITS OF NEVADA, A Division of Southern Wine and Spirits of America, Inc., Appellee,

v.MOUNTAIN VALLEY SPRING COMPANY, LLC, Appellant.

No. 10–2718.

United States Court of Appeals, Eighth Circuit.

Submitted: March 29, 2011.Filed: July 19, 2011.

Ryan J. Solomon, argued, Amy Lee Stewart, Amanda K. Wofford, on the brief, Little Rock, AR, for appellant.

Jennifer H. Doan, argued, Darby Vincent Doan, Joshua R. Thane, on the brief, Texarkana, TX, for appellee.Before LOKEN, SMITH, and GRUENDER, Circuit Judges.GRUENDER, Circuit Judge.

A jury returned a verdict in favor of Southern Wine & Spirits of Nevada (“Southern”) on its claims arising out of a distributor agreement with Mountain Valley Spring Company (“Mountain Valley”) and a verdict in favor of Mountain Valley on one of its counterclaims. Notwithstanding the verdict, the district court granted judgment as a matter of law to Southern on Mountain Valley's counterclaim but denied Mountain Valley's motion for judgment as a matter of law on Southern's claims. Mountain Valley appeals both of these rulings and the district court's denial of its motion for a new trial. For the reasons that follow, we affirm in part and reverse in part.

I. BACKGROUND

On March 12, 1993, Southern and Mountain Valley entered into a distributor agreement (“Agreement”) granting Southern “the exclusive right to sell and distribute” bottled water products supplied by Mountain Valley within a seventeen-county region around Las Vegas, Nevada. Mountain Valley drafted the Agreement, which provided as follows with regard to its duration:

II. TERM. The duration of this Distributor relationship shall be conditioned upon the following:

2.1 Term.

This Agreement shall become effective upon the date set forth in Paragraph 10.18 hereof and shall remain in effect until terminated under Paragraph 2.2 or 2.3 hereof.

2.2 Termination by Mutual Consent.

This Agreement may be terminated at any time by mutual consent of the parties embodied in a single writing signed by each party and effective as provided therein.

2.3 Termination by Default.

This Agreement may be terminated for cause pursuant to Paragraph 5.10 ¹ hereof.

In 2004, Clear Mountain Spring Water Company bought Mountain Valley and assumed its name and the Agreement. Soon after, Mountain Valley sought to reposition its brand from focusing “on selling cheap water” to competing “in the premium segment of the bottled water business.” Mountain Valley redesigned its product offerings and advertising and introduced a newly designed glass bottle in order to compete with well-established premium water products such as Voss, Evian, and Fiji. Mountain Valley asserts that Southern did not approve of this brand repositioning and did not carry and promote the full line of its high-end glass bottled water products. Mountain Valley also alleges that Southern refused to attend two of its national conferences, at which Mountain Valley sought to educate its distributors about its new marketing strategies. In 2006, Mountain Valley began negotiating with Anheuser–Busch for a nationwide distribution contract, although no agreement was consummated.

In May 2007, the course of business between the parties changed. Mountain Valley claims that it merely altered the prices and terms on which it sold products to Southern as allowed by the Agreement, while Southern claims that Mountain Valley placed its account “on credit hold” and then “refused to process, load, or ship ... six purchase orders.” On June 7, Mountain Valley representatives traveled to Las Vegas to meet with Southern representatives. Mountain Valley claims that its representatives sought to discuss the possibility of mutually and amicably terminating the Agreement if Mountain Valley's negotiations toward a national distributorship agreement proved successful. Southern claims that Mountain Valley's representatives unilaterally terminated the Agreement. Furthermore, Southern argues that, on June 18, Mountain Valley arranged for the Nevada Beverage Company to take over the distribution of Mountain Valley's bottled water products within Southern's exclusive distribution territory. Mountain Valley, however, claims that it did not terminate the Agreement until October 2007, after “Southern's refusal to purchase product at the prices and terms Mountain Valley set and Southern's various other defaults and nonperformance.”

Southern filed suit, bringing claims for breach of contract, unjust enrichment, breach of the implied covenant of good faith and fair dealing, fraud, failure to pay on account stated, tortious interference, and defamation. Mountain Valley asserted counterclaims for breach of the implied covenant of good faith and fair dealing, fraud, defamation, and tortious interference. Mountain Valley moved for partial summary judgment on Southern's breach of contract claim, arguing that the Agreement was for an indefinite term and, thus, terminable at will by either party. The district court denied this motion, construing the Agreement as establishing a perpetual term, rendering it terminable only according to its provisions.

Both parties moved for judgment as a matter of law at the close of the evidence. The district court dismissed Southern's claim for unjust enrichment and dismissed both parties' claims for fraud, defamation, and tortious interference. The jury returned a verdict for Southern on its claims for breach of contract and breach of the implied covenant of good faith and fair dealing, awarding damages in the amount of $818,942.00, and a verdict for Southern on its claim for failure to pay on account stated, awarding additional damages in the amount of $42,333.35. The jury also returned a verdict for Mountain Valley on its counterclaim for breach of the implied covenant of good faith and fair dealing and awarded Mountain Valley damages in the amount of $183,341.65. Southern subsequently filed a renewed motion for judgment as a matter of law on Mountain Valley's counterclaim, which the district court granted. Mountain Valley also filed a renewed motion for judgment as a matter of law and, alternatively, requested a new trial, which the district court denied. The district court then entered a judgment in favor of Southern in the amount of $861,275.35 plus applicable pre-judgment and post-judgment interest. This appeal followed.

II. DISCUSSIONA. Term of the Agreement

Mountain Valley contends that the district court erred in construing the Agreement as having a perpetual term, rather than an indefinite term that would allow either party to terminate it at will. Mountain Valley moved for a new trial on Southern's breach of contract claim, at which the sole issue would be whether Mountain Valley permissibly terminated the Agreement after a reasonable time and with reasonable notice. See Sierra Wine & Liquor Co. v. Heublein, Inc., 626 F.2d 129, 131 (9th Cir.1980) (applying Nevada law) (holding that a “contract which includes no express term is terminable at will after a reasonable period, upon reasonable notice”). Southern asserts, and the district court agreed, that the Agreement was perpetual and, therefore, only terminable pursuant to its explicit terms.

We review the district court's denial of Mountain Valley's motion for a new trial for abuse of discretion. See United States v. Barrera, 628 F.3d 1004, 1007 (8th Cir.2011). A district court abuses its discretion when it bases its decision on a legal error. Roach v. Stouffer, 560 F.3d 860, 863 (8th Cir.2009). As such, “[w]e review de novo a district court's interpretation and construction of a contract, as well as a district court's interpretation of state law.” Am. Prairie Constr. Co. v. Hoich, 594 F.3d 1015, 1023 (8th Cir.2010). Our subject matter jurisdiction in this case is based upon diversity of citizenship, and the parties agree that we are to apply Nevada law. See Kaufmann v. Siemens Med. Solutions USA, Inc., 638 F.3d 840, 843 (8th Cir.2011). Thus, we “must attempt to predict what [the state supreme] court would decide if it were to address the issue.” Raines v. Safeco Ins. Co. of Am., 637 F.3d 872, 875 (8th Cir.2011).

According to Nevada law, “the court shall effectuate the intent of the parties” when interpreting a contract. Davis v. Nev. Nat'l Bank, 103 Nev. 220, 737 P.2d 503, 505 (1987). “A basic rule of contract interpretation is that ‘every word must be given effect if at all possible.’ ” Musser v. Bank of Am., 114 Nev. 945, 964 P.2d 51, 54 (1998) (quoting Royal Indem. Co. v. Special Serv. Supply Co., 82 Nev. 148, 413 P.2d 500, 502 (1966)). “A court should not interpret a contract so as to make meaningless its provisions.” Phillips v. Mercer, 94 Nev. 279, 579 P.2d 174, 176 (1978).

The Supreme Court of Nevada addressed the enforceability of perpetual contracts for the first time in Bell v. Leven, 120 Nev. 388, 90 P.3d 1286 (2004). In Bell, the contract included language regarding its duration: “the term of this agreement is perpetual or until terminated by mutual consent [of] all parties.” Id. at 1287 (alteration in original). The state district court “concluded that the perpetual duration clause in the agreement did not provide a legally sufficient duration, and thus, determined that the duration of the agreement was for a reasonable period of time.” Id. The Supreme Court of Nevada reversed and held that, although “courts should avoid construing contracts to impose a perpetual obligation[,] ... when the language of a contract clearly provides that the contract is to have a perpetual duration, the courts must enforce the contract according to its terms.” Id. at 1288.

In reaching this conclusion, the Supreme Court of Nevada cited, with approval, the Oregon Court of Appeals' decision in Paul Gabrilis, Inc. v. Dahl, 154 Or.App. 388, 961 P.2d 865 (1998). Bell, 90 P.3d at 1288. In Dahl, the court stated that, “if there is nothing in the nature or language of a contract to...