W. Silver Recycling, Inc. v. Nidec Motor Corp., Case No. 4:20-CV-00837 JAR
| Decision Date | 26 May 2021 |
| Docket Number | Case No. 4:20-CV-00837 JAR |
| Parties | W. SILVER RECYCLING, INC., Plaintiff, v. NIDEC MOTOR CORP., Defendant. |
| Court | U.S. District Court — Eastern District of Missouri |
This matter is before the Court on Plaintiff / Counterclaim Defendant W. Silver Recycling, Inc.'s ("WSR") Motion to Dismiss First Amended Counterclaims of Defendant / Counterclaim Plaintiff Nidec Motor Corporation ("Nidec"). (Doc. 39). The motion is fully briefed and ready for disposition. For the reasons discussed below, the motion will be granted in part.
This Court has previously summarized the relevant background facts in this case:
On August 31, 2018, [WSR] and [Nidec] executed a Scrap Management Agreement (the "Agreement"). (Doc. 1 at ¶ 12; Doc. 4-1). Pursuant to the Agreement, WSR would process and purchase scrap metal created as a by-product of Nidec's manufacturing at seven facilities until August 31, 2021. (Doc. 1 at ¶¶ 12-14). On April 16, 2020, Nidec informed WSR that, specifically as to the Nidec Laminaciones de Acero SA de CV facility ("NLA"), Nidec was "aggressively looking to improve revenue and is prepared to test the market." (Id. at ¶ 40). WSR promptly replied that the parties "are of course under contract," and NLA "falls under the contract." (Id. at ¶¶ 41-42). On June 9, 2020, Nidec informed WSR that it "no longer requires" WSR's scrap management services at NLA. (Id. at ¶ 43). Nidec is currently selling the NLA scrap metal to the buyer who preceded WSR while allegedly continuing to utilize WSR's equipment. (Id. at ¶¶ 46-47).
WSR proceeded to bring this action against Nidec alleging breach of contract, breach of implied covenant of good faith and fair dealing, and negligent misrepresentation. Specifically, WSR claimed that the Agreement established an exclusive arrangement which Nidec violated by terminating services at NLA. Nidec sought dismissal on the grounds that the Agreement lacked any exclusivity provision. On December 24, 2020, this Court dismissed WSR's breach of contract claims because the "fully integrated Agreement is entirely silent as to exclusivity, and there is no specific contractual language permitting this Court to find ambiguity as a matter of law." (Doc. 17 at 15). See generally W. Silver Recycling, Inc. v. Nidec Motor Corp., No. 4:20-CV-837 JAR, 2020 WL 7695706 (E.D. Mo. Dec. 24, 2020). WSR's claims for breach of implied covenant of good faith and fair dealing and negligent misrepresentation remain present in the case.
On April 6, 2021, Nidec filed a First Amended Counterclaim making two breach of contract claims. (Doc. 37). First, in Count I, Nidec estimates $266,000 in damages due to WSR's alleged failure to comply with its obligation to guarantee highest prices available pursuant to Exhibit B, ¶ 10 of the Agreement. (Id. at ¶¶ 27-33). In Count II, Nidec claims that WSR has breached its indemnification obligations under Exhibit A, Article 1 of the Agreement by failing to indemnify Nidec for the cost of this suit. (Id. at ¶¶ 34-43).
When ruling on a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6), this Court must "accept the allegations contained in the complaint as true and all reasonable inferences from the complaint must be drawn in favor of the nonmoving party." Young v. City of St. Charles, 244 F.3d 623, 627 (8th Cir. 2001). To survive this motion to dismiss, the counterclaim "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). While detailed factual allegations are not necessary at this stage, Nidec's obligation to provide the grounds of its entitlement to relief"requires more than labels and conclusions." Twombly, 550 U.S. at 555. Dismissal is warranted, moreover, if Nidec's claims are "fatally flawed in their legal premises and designed to fail, thereby sparing litigants the burden of unnecessary pretrial and trial activity." Young, 244 F.3d at 627 (citing Neitzke v. Williams, 490 U.S. 319, 326-27 (1989)).
The Agreement incorporates Exhibit B, "Special Terms and Conditions," in which WSR agrees to various practical obligations in its performance of the scrap metal recycling services. WSR promises, for example, to provide timely reports and forecasts, meet all environmental legal requirements, and provide safety seals for the trailers. (Doc. 4-1 at 7). In its First Amended Counterclaim, Nidec alleges that WSR has breached ¶ 10 of Exhibit B (hereinafter, the "Guaranteed Price Provision"), which states in its entirety:
Guarantee highest prices available for scrap material through continual improvements in freight rates, handling/segregating ideas, new and competitive end users.
Nidec claims that it "determined that WSR was not providing the highest prices for scrap recycling based on a review of quotes received from others and comparable pricing at other facilities." (Doc. 37 at ¶ 20). In its motion to dismiss, WSR argues that the Guaranteed Price Provision simply "obligates WSR to provide Nidec with the best prices WSR could provide, not to match the best price offered to Nidec by a third party." (Doc. 40 at 5). Nidec essentially responds that WSR's interpretation would render any obligation illusory and, alternatively, the Court should deny the motion to dismiss because the Guaranteed Price Provision may be ambiguous. (Doc. 45 at 6-9).
Under Missouri law, a breach of contract claim requires the following elements: "(1) the existence and terms of a contract; (2) that plaintiff performed or tendered performance pursuant to the contract; (3) breach of the contract by the defendant; and (4) damages suffered by the plaintiff." Keveney v. Missouri Mil. Acad., 304 S.W.3d 98, 104 (Mo. banc 2010) (citation omitted). The issue is whether WSR breached the Guaranteed Price Provision by allegedly failing to provide the "highest prices available" in the scrap metal market accessible to Nidec's facilities. Once again, the parties offer entirely different interpretations of a seemingly straightforward provision. See W. Silver Recycling, 2020 WL 7695706, at *2 (). WSR views the Guaranteed Price Provision more like an obligation to use best efforts to improve prices by continually improving services. Nidec interprets the provision more formally as an obligation to match industry prices.
"The cardinal rule in the interpretation of a contract is to ascertain the intention of the parties and to give effect to that intention." J.E. Hathman, Inc. v. Sigma Alpha Epsilon Club, 491 S.W.2d 261, 264 (Mo. banc 1973); see also Whelan Sec. Co. v. Kennebrew, 379 S.W.3d 835, 846 (Mo. banc 2012). When interpreting a contract, it is the court's "role [ ] to determine the intention as manifested not by what the parties say now they intended but by the document." Press Mach. Corp. v. Smith R.P.M. Corp., 727 F.2d 781, 784 (8th Cir. 1984). In certain instances, however, the parties' chosen terms will render their true intentions ambiguous, and parol evidence may be necessary to ascertain the contract's meaning. See Tribus, LLC v. Greater Metro, Inc., 589 S.W.3d 679, 702-03 (Mo. Ct. App. 2019). A contract is ambiguous "only if its terms are susceptible to more than one meaning so that reasonable [persons] may fairly and honestly differ in their construction of the terms." Eisenberg v. Redd, 38 S.W.3d 409, 411 (Mo. banc 2001) (citation omitted). The existence of ambiguity is a question of law. See Kennebrew, 379 S.W.3d at 846.
This Court finds that the Guaranteed Price Provision is ambiguous and declines to dismiss Nidec's breach of contract claim as a matter of law. As emphasized by Nidec, the provision explicitly provides that WSR must "[g]uarantee highest prices available." This Court recognizes that it "may not read into a contract words which the contract does not contain." Lawn Managers, Inc. v. Progressive Lawn Managers, Inc., 959 F.3d 903, 913 (8th Cir. 2020) (citation omitted). A reasonable, plain-language interpretation of the Guaranteed Price Provision is that it obligates WSR to guarantee the highest scrap prices available in the industry. See Deal v. Consumer Programs, Inc., 458 F. Supp. 2d 970, 975 (E.D. Mo. 2005) (citation omitted) ("When a contract uses plain and unequivocal language it must be enforced as written.").
But other elements of the Agreement render it uncertain whether Nidec's interpretation truly reflects the parties' intentions at the time of contracting, and "[w]hether an ambiguity exists depends on the context of the agreement." Sherman v. Deihl, 193 S.W.3d 863, 866 (Mo. Ct. App. 2006) (citation omitted). The Guaranteed Price Provision itself only states WSR would guarantee high prices "through continual improvements," such as by increasing freight rates and identifying new end users. Article 2.2 provides that WSR will pay Nidec in accordance with prices identified in Exhibit C, an extensive schedule of highly specific scrap prices, and fails to mention any matching of industry prices.
The question before this Court is whether the Guaranteed Price Provision requires WSR to "[g]uarantee highest prices available" in the industry as a whole or to the best of its ability based on continuous improvement efforts. Considering the plain language of the Guaranteed Price Provision and the entire Agreement's context, this Court finds that reasonable people could disagree as to the proper interpretation. Therefore, the Guaranteed Price Provision is ambiguous, and parol evidence may be necessary to determine the true intentions of the parties. See Yeringtonv. La-Z-Boy, Inc., 124 S.W.3d 517, 520 (Mo. Ct. App. 2004) (...
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