Universal Forest Products v. Morris Forest Product

• Decision Date: 02 June 2008
• Docket Number: No. 06-C-0698.,06-C-0698.
• Citation: 558 F.Supp.2d 893
• Parties: UNIVERSAL FOREST PRODUCTS EASTERN DIVISION, INC., Plaintiff, v. MORRIS FOREST PRODUCTS, LLC, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

558 F.Supp.2d 893

UNIVERSAL FOREST PRODUCTS EASTERN DIVISION, INC., Plaintiff, v. MORRIS FOREST PRODUCTS, LLC, Defendant.

No. 06-C-0698.

United States District Court, E.D. Wisconsin.

June 2, 2008.

Douglas W. Van Essen, Lee T. Silver, Silver & Van Essen PC, Grand Rapids, MI, Elizabeth C. Perkins, Rachel A. Schneider, Quarles & Brady LLP, Milwaukee, WI, for Plaintiff.

Kendall W. Harrison, Godfrey & Kahn SC, Madison, WI, Jonathan R. Ingrisano, Godfrey & Kahn SC, Milwaukee, WI, for Defendant.

DECISION AND ORDER

WILLIAM E. CALLAHAN, JR., United States Magistrate Judge.

I. PROCEDURAL AND FACTUAL BACKGROUND

This action was commenced on June 15, 2006, when the plaintiff, Universal Forest Products Eastern Division, Inc. ("Universal"), filed its original complaint against the defendant, Morris Forest Products, LLC ("Morris"). Universal asserts two counts against the defendants: (1) equitable subrogation/breach of contract; and (2) unjust enrichment. Universal filed its First Amended Complaint on October 11, 2006, adding additional paragraphs to its pleadings under the unjust enrichment count.

On September 5, 2006, the defendant filed a motion to dismiss Counts One and Two pursuant to Fed.R.Civ.P. 12(b)(6). On November 30, 2006, the court denied the defendant's motion to dismiss.

Currently pending before the court is the defendant's motion for summary judgment which is fully briefed and is ready for resolution. For the reasons which follow, the defendant's motion for summary judgment will be granted.

In accordance with the provisions of Civil Local Rule 56.2(a) (E.D.Wis.), the defendant's motion for summary judgment was accompanied by a set of proposed findings of fact. Likewise, the plaintiffs response to the defendant's motion for summary judgment contained responses to the defendant's proposed findings of fact as well as some additional proposed findings of fact. A review of the parties' respective proposed findings and the responses thereto reveal that the following are material and (except where noted) undisputed facts that are relevant to the disposition of the defendant's motion for summary judgment.

Morris is an Alabama corporation located in Tallapoosa County, Alabama. Among other things, Morris manufactures and sells finished wood products. Morris is a 25 to 40 employee, family-run operation led by Rod and Wanda Morris. (Defendant's Proposed Findings of Fact ("DPFOF") ¶ 1.)

Universal is one of almost a dozen subsidiaries of Universal Forest Products, Inc., ("UFP") a publicly traded company (NASDQ: UFPI). (DPFOF ¶ 34.) UPF is one of the nation's largest manufacturers of lumber and wood products and components. (DPFOF ¶ 35.) In 2005, UFP's sales exceeded $2.6 billion, which included over $1 billion in sales to the do-it-yourself ("DIY")/retail market. (DPFOF ¶ 36.) Morris' sales in 2005 were approximately $5.5 million, and it sold less than $1 million to DIY retailers. (DPFOF ¶ 37.)

In 2003, Morris entered into a licensing agreement with Keystone Exterior Design, LLC ("Keystone") to manufacture and sell a residential wood deck system that Keystone had designed. (DPFOF ¶ 2.) Keystone's Residential Deck System was designed to be pre-constructed so that consumers could assemble it without tools. An 8' by 8' deck could be assembled in approximately one hour. The Keystone system was customizable, and was made up of a variety of separate "kits" that could be purchased to add on to or vary the base kit "A". (DPFOF ¶ 3.)

Morris' license agreement with Keystone, executed on November 1, 2003 stated: "This agreement is for the term from 11/1/2003 through 10/31/2004; thereafter the parties will review and renew the agreement annually, making revisions that are mutually agreeable." (DPFOF ¶ 4; Morris Decl. 4, Ex. A.) Morris' license agreement with Keystone further stated that "If licensor [Keystone] receives from a third party an offer to purchase its stock, [Morris] will have the first right of refusal in licensed markets and territories." (DPFOF ¶ 6; Morris Decl, Ex. A.).

In August 2003, Don Ludwig of Keystone and Rod Morris of Morris traveled to Eau Claire, Wisconsin to pitch the Keystone system to Menard, Inc. ("Menard") for resale in its stores. (DPFOF ¶ 7.) Dennis Scott ("Scott") was the Menard buyer and Morris' principal contact. (DPFOF ¶ 8.) By early 2004, Menard agreed to purchase the Keystone system products from Morris, conditioned on Morris' agreement to Menard's established vendor compliance program. (DPFOF ¶ 9.)

Menard's vendor compliance program included a "no hassle" return policy (the "Return Policy"). Such policies are typical among "big box" retailers and DIY national chains. (DPFOF ¶ 10.)

Menard considers such policies important to stay competitive with other big box retailers. Menard's Return Policy explains the competitive context from which such policies are born:

We don't like the liberal return policies forced on us, but it is a trend in today's marketplace for consumers to expect retailers to take back purchases that do not meet their expectations for any reason or no reason. We have to accept the customer's return, no matter how inventive their excuse may be, in fear that the unhappy customer will never come back.

(DPFOF ¶ 11; Dep. Ex. 7 at 16.)

Procedurally, under Menard's Return Policy, in the next billing cycle after a return, the vendor designated for return items will be billed back via a debit memo itemizing the deduction for returns on the vendor's checks. (DPFOF ¶ 12.)

The Menard's Return Policy further provides that "[i]f you are a new vendor taking over an existing program, you will be automatically responsible for the old vendor's returns unless arrangements are made to the contrary." (DPFOF ¶ 13.)

Menard's Return Policy includes and incorporates Menard's Conditions of Order, which also appears on the back of each Menard's purchase order. Provisions of the Conditions of Order include in part:

E. All goods are to be new and first quality. Vendor agrees to reimburse Menard for any return of the goods, whether by Menard or Menard's customers, for any reason. The returned goods are billed back at Menard's store level or Menard's warranty center. Vendor agrees to accept Menard's account of how much credit is due. Vendor agrees that Menard does not need to have any customer return documents to verify its account. Vendor agrees not to require that the returns be brought back in its original package. * * * Vendor waives any right to inspect the goods prior to their disposition by Menard. Vendor shall be responsible for shipping, storage and handling charges. Menards does not guarantee the condition of the returns that are shipped back. * * * No return authorization numbers will be required for returning the goods or for any reimbursements to Menards. If Menard believes, in its sole discretion, that there is or will be excessive returns, Menard may establish a setoff in an amount equal to the amount that Menard believes will cover the return of the goods purchased hereunder, and withhold that amount from the amounts due the Vendor under the purchase order or any subsequent purchase order. Vendor understands that its obligation for the returns will last until all of the goods purchased are sold, plus a period of 12 months, or longer if Vendors warranty is longer.

F. In consideration of becoming a Vendor for the line(s) of goods listed on the purchase order, you agree to compensate Menard in full for all goods returned by customers, as outlined above, including any goods supplied by previous vendors for the line(s) of goods listed on the purchase order.

. . .

I. Vendor agrees that the terms and conditions hereunder and of the purchase order shall be interpreted and construed by the laws of the State of Wisconsin.

(DPFOF ¶ 14; Dep. Ex. 8.) (emphasis added)

Vendors' agreement to the Menard's Return Policy and Conditions of Order is non-negotiable. (DPFOF ¶ 15.)

Morris began shipping Keystone kits, a seasonal product, to Menard in Spring 2004. (DPFOF ¶ 16.) In the first year of the agreement, Menard accounted for $1.5 million in sales of the Keystone kits. (DPFOF ¶ 17.)

Menard deducted Morris for returns in an amount approximating $105,763.90 during the time Morris was the vendor. (DPFOF ¶ 24; Pl.'s Resp. to DPFOF ¶ 24.)

In December of 2004, Keystone contacted Universal about selling Keystone to Universal. (DPFOF ¶ 30; Pl.'s Resp. to DPFOF ¶ 30.) A sale of Keystone to Universal was never consummated but Keystone and Universal entered into their own long-term licensing agreement in April 2005. (DPFOF ¶ 32.)

Morris and Keystone worked out a short term license that enabled Morris to manufacture and sell $400,000 in additional Keystone Decking to Menard through April 30, 2005, while manufacturing was transitioning to Universal. Morris so performed under an interim license that expired at the end of April. (DPFOF ¶¶ 43, 46; Pl.'s Resp. to DPFOF ¶ 39.)

By April 2005, Universal was in discussions with Menard as the successor to the Keystone product line previously manufactured and sold by Morris. Bryan Hoexum ("Hoexum") was a principal sales representative for Universal during the negotiations with Universal. (DPFOF ¶ 48; Hoexum Dep. at 11-12.) Hoexum traveled to Eau Claire with Keystone's Don Ludwig to meet with Scott on April 15, 2005. (DPFOF ¶ 50.)

At that meeting and thereafter, Hoexum and Universal successfully negotiated several requested changes to Menard's vendor compliance agreement. (DPFOF ¶ 51; Hoexum Dep. at 66-70.) Universal could not cause Menard to strike or alter its Return Policy or Conditions of Order. (DPFOF ¶ 52.) The Return Policy and Conditions of Order signed by Universal were identical to those signed by Morris. (Pl.'s Resp. to DPFOF ¶ 38.)

Universal did not like the Menard's Return Policy. (DPFOF ¶ 53.) In an attempt by Universal to negotiate out the undesirable terms, Universal's authorized contract signatory Eric Maxey had submitted a signed...