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West Linn Paper Co. v. BTC-USA Inc.

United States District Court, D. Minnesota

November 18, 2014

West Linn Paper Company, Plaintiff,
v.
BTC-USA Inc., and John Bourgeois, Defendants.

MEMORANDUM AND ORDER

PAUL A. MAGNUSON, District Judge.

This matter is before the Court on the parties' cross-Motions for Partial Summary Judgment. For the reasons that follow, Plaintiff's Motion is granted in part and denied in part, and Defendants' Motion is denied.

BACKGROUND

For 18 years, Defendant BTC-USA, Inc., sold paper manufactured by Plaintiff West Linn Paper Company to two entities: American Spirit Graphics ("ASG") and Amidon Graphics. Much of the dispute in this case centers on the nature of the relationship between West Linn and BTC. West Linn contends that BTC is a "broker" that merely re-sold West Linn's paper, and that ASG and Amidon were BTC's customers. (Am. Compl. ¶¶ 1-2.) BTC contends that BTC was a de facto sales representative for West Linn, and that West Linn solely dictated the terms of BTC's sales to ASG and Amidon, paying BTC a set commission on each sale. There is no dispute that West Linn would bill BTC for the paper, and BTC would in turn bill ASG and Amidon, paying West Linn after BTC received payment from ASG and Amidon. (Kilby Decl. (Docket No. 52) Exs. 5, 6 (BTC purchase orders to West Linn and invoices to ASG); Ex. 2 (Bourgeois Dep.) at 47.) There is also no dispute that BTC retained a fixed percentage of ASG's or Amidon's payment as its profit. (Id. Ex. 2 (Bourgeois Dep.) at 48; Ex. 1 (Huskey Dep.) at 162-63.) West Linn refers to this as a trade discount; Defendants contend that it represents a sales commission.

BTC's sales of West Linn's paper to ASG represented nearly 95% of BTC's annual revenue. (Bourgeois Decl. (Docket No. 48) ¶ 18.) In May 2013, ASG informed BTC that it would no longer buy West Linn paper from BTC, but would use another entity called Unisource. (Krause Decl. (Docket No. 55) ¶ 6 & Ex. A.) The parties dispute how this decision came about. BTC contends that West Linn and ASG conspired to kick BTC out of the picture; West Linn claims that the decision to go with another supplier was ASG's alone.

At the time ASG terminated its relationship with BTC, ASG had several paper orders outstanding with BTC. (Hunger Decl. (Docket No. 54) ¶ 4 & Ex. E.) West Linn shipped those orders directly to ASG, per the parties' custom, and ASG paid BTC for those orders.[1] On April 30, 2013, BTC issued a check for just over $88, 000 to West Linn in partial payment for some of the orders, but after ASG terminated its relationship with BTC, BTC stopped payment on the check. (Van Oort Aff. (Docket No. 49) Exs. 7, 8; Kilby Decl. (Docket No. 52) Ex. 13.) According to West Linn, BTC owes West Linn nearly $260, 000 for paper West Linn shipped to ASG and Amidon in late April and early May 2013, and for which BTC received full payment from ASG and Amidon.

BTC's sole employee and president/CEO is Defendant John Bourgeois. West Linn contends that in May 2013, Bourgeois emptied BTC's bank account, paying himself nearly $270, 000 and rendering BTC insolvent and judgment-proof. (Kilby Decl. (Docket No. 52) Exs. 16-17.) To date, BTC has not paid West Linn for any of the paper West Linn shipped to ASG and Amidon from late April through May 2013.

West Linn's Amended Complaint raises seven claims against BTC and Bourgeois: breach of contract (Count I), account stated (Count II), unjust enrichment (Count III), fraud (Count IV), issuance of worthless check in violation of Minn. Stat. § 604.113 (Count V), and violation of the Minnesota Uniform Fraudulent Transfer Act ("MUFTA") (Count VI). West Linn's final count (Count VII) is brought against Bourgeois alone, and contends that West Linn may pierce the corporate veil so that Bourgeois is personally liable for all of West Linn's claims against BTC.

BTC and Bourgeois brought three counterclaims against West Linn. The first contends that West Linn violated Minnesota's Termination of Sales Representative Act, Minn. Stat. § 325E.37, by terminating BTC without good cause and without notice. According to Defendants, West Linn owes BTC commissions for all of West Linn's sales to ASG for the 180-day period after the alleged wrongful termination, plus what Defendants estimate to be the amount BTC would have received from commissions until Bourgeois's retirement in approximately five years. Defendants' second counterclaim alleges that West Linn breached an oral sales representative agreement with BTC. Finally, the third counterclaim contends in the alternative that West Linn's conduct constitutes tortious interference with contract and tortious interference with business relations.

DISCUSSION

Summary judgment is proper if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The Court must view the evidence and inferences that may be reasonably drawn from the evidence in the light most favorable to the nonmoving party. Enter. Bank v. Magna Bank, 92 F.3d 743, 747 (8th Cir. 1996). However, "summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy, and inexpensive determination of every action." Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986).

The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Id. at 323; Enter. Bank, 92 F.3d at 747. A party opposing a properly supported motion for summary judgment may not rest on mere allegations or denials, but must set forth specific facts in the record showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986).

West Linn's Motion seeks summary judgment against all of Defendants' counterclaims and several of West Linn's claims, and asks for a judgment in the amount of the damages West Linn alleges. Defendants' Motion seeks summary judgment only on West Linn's contention that veil-piercing is appropriate. Defendants ask that Bourgeois be dismissed from the lawsuit.

A. West Linn's Motion

West Linn seeks summary judgment on all of Defendants' counterclaims: breach of the alleged oral sales representative contract, the alleged breach of Minnesota's Termination of Sales Representative Act, and alleged tortious interference with BTC's relationship with ASG. In addition, West Linn seeks summary judgment on its own breach of contract claim, and an award of $258, 016.35, which is the amount it contends BTC owes West Linn for the April and May 2013 paper shipments to ASG and Amidon. West Linn also contends that summary judgment is warranted on its claims under the worthless check statute and MUFTA. Finally, West Linn asks for an order piercing the corporate veil and setting aside the May 2013 payments from BTC to Bourgeois. Defendants do not oppose the Motion as it relates to their counterclaim for breach of an alleged oral contract, apparently conceding that this claim should be dismissed.

1. West Linn's Claims

a. Breach of Contract

The Amended Complaint alleges that BTC contracted to purchase West Linn's paper "on the terms stated in the Unpaid Invoices... and the Credit Application and Agreement." (Am. Compl. ¶ 31.) West Linn's summary-judgment Motion argues that the U.C.C. applies, and that there was a contract under the U.C.C. because West Linn's shipment of paper under BTC's invoice constituted acceptance of BTC's "offer" to buy the paper. See Minn. Stat. § 336.2-206(1)(b).

Defendants protest what they see as a change in legal theory from the Amended Complaint to the summary-judgment briefing. But a breach of contract under the U.C.C. is not substantively different from a breach of contract in other circumstances. Rather, the U.C.C. merely provides the framework for a determination of offer and acceptance, which are required for the formation of any contract whether related to the sale of goods or otherwise. In other words, West Linn's argument in its moving papers is merely that, in this case, offer and acceptance can be established-and a binding contract thereby formed-by BTC's invoices ordering paper from West Linn and West Linn's prompt shipment of that paper. Whether West Linn points to the parties' written agreements and invoices or to the U.C.C. to support its claim, its theory is the same: by failing to pay West Linn for the paper West Linn shipped to ASG, BTC breached its contract with West Linn.

Thus, Defendants' first contention, that ASG, not BTC, was the "buyer" for purposes of the U.C.C., is ultimately not relevant to West Linn's claim that BTC's failure to pay constituted a breach of contract. There is no dispute that BTC sent paper orders to West Linn and that West Linn shipped the paper as those orders requested. That ASG was the ultimate recipient of the paper is irrelevant, because, having received payment from ASG, BTC does not and cannot argue that BTC was not required to in turn pay West Linn for that paper. Similarly, Defendants' insistence that West Linn, not BTC, set the price for the paper does not mean that West Linn has no claim for breach of contract. The parties clearly agreed to the price term for the paper, as BTC requested paper at a certain price and West Linn shipped the paper at that price.

Nor is Defendants' argument regarding who took title to the paper on point. There is no requirement under either the U.C.C. or contract law in general that title to the goods must pass from West Linn to BTC in order for West Linn and BTC to have a contract. Companies are free to contract for the delivery of goods and the title thereto to another entity, which is exactly what occurred here.[2]

West Linn has established the elements of its breach-of-contract claim: formation of a contract, West Linn's performance under that contract, BTC's breach, and damages. Park Nicollet Clinic v. Hamann, 808 N.W.2d 828, 833 (Minn. 2011). Defendants do not argue that there are any defenses that might negate West Linn's damages or excuse Defendants' failure to pay as promised.[3] Absent any genuine issue of fact as to a defense or excuse, West Linn is entitled to summary judgment on its breach-of-contract claim.

West Linn also argues that summary judgment is appropriate as to its claim for attorney's fees and costs. According to West Linn, the governing contract is the Credit Application and Terms and Conditions the parties entered into at the beginning of their relationship, which provided for attorney's fees and costs for any collection action on unpaid invoices. (Hunger Decl. (Docket No. 54) Ex. A.) Defendants contend that this agreement is no longer in force because of two changes to the terms of those agreements in the intervening years: a March 1998 increase in BTC's credit limit with West Linn (id. Ex. C), and a September 2010 revision to early payment discount terms (id. Ex. D). West Linn contends that these changes merely modified the Terms and Conditions agreement, but did not replace that agreement.

The parties' original Credit Application and Terms and Conditions set forth the terms of the parties' agreement, including an early payment discount of two percent if invoices were paid within 30 days, a reservation of rights, a limitation on West Linn's liability for failure to deliver goods due to circumstances beyond its control, a provision for attorney's fees and costs, and a choice-of-venue provision. (Id. Ex. A.) The first document that Defendants allege constituted a substitution for this original contract is a one-sentence letter to BTC stating that BTC's credit line was increased to $400, 000. (Id. Ex. C.) The second alleged substitute contract is a letter to "Valued West Linn Paper Customer" stating that West Linn was "revising" its cash payment discount terms for certain grades of paper to one percent for payment within 21 days. (Id. Ex. D.)

"[W]hether particular facts amount to modification of a contract is a question of law." Cousineau v. Norstan, Inc., 322 F.3d 493, 496 (8th Cir. 2003). Here, it is not a close question whether the two alleged substitute contracts were indeed substitutes for the parties' original agreement. The first letter was merely an increase in BTC's credit line and does not reference any other aspect of the Terms and Conditions. The second letter was not specific to BTC and states on its face that it is only revising a certain term of the parties' previous agreement. The Terms and Conditions continued to govern the parties' relationship and thus West Linn, having ...


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