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Wisconsin Staffing Services, Inc. v. Ara, Inc.

United States District Court, D. Minnesota

June 3, 2015

Wisconsin Staffing Services, Inc., d/b/a Nicolet Staffing, Plaintiff,
v.
ARA, Inc., d/b/a Paperless Staffing, Defendant.

ORDER

JOAN N. ERICKSEN, District Judge.

This action involves a contract dispute between Plaintiff Wisconsin Staffing Services, Inc. (WSS) and Defendant ARA, Inc. The matter is before the Court on ARA's motion for summary judgment.

BACKGROUND

ARA is a "factor, " a business that purchases accounts receivable at a discount in exchange for immediate payment of the discounted amount. The difference between the full value of the account and the discount price is called an "administrative fee." Before selling its assets at the end of 2012, WSS was a staffing agency that lent its employees to businesses in need of temporary personnel.

On April 5, 2009, WSS and ARA entered into a Factoring Agreement under which WSS sold and assigned its accounts receivable exclusively to ARA. Exhibit C to the Factoring Agreement established a sliding scale for the administrative fee based on the gross amount of the accounts receivable WSS assigned to ARA on a weekly basis. The fee ranged from 1.75% of the accounts receivable to 2.35%. The agreement was signed by Lester Zunker as president of WSS and David Dourgarian as president of ARA. The parties later agreed to an addendum under which ARA would charge a 2.4% fee until WSS satisfied an outstanding balance. The addendum further provided that, once the balance was satisfied, a sliding scale fee ranging from 2.1% to 2.35% would remain in place until February 1, 2010. The February 1 date passed and WSS eventually satisfied the balance, but ARA continued to charge WSS administrative fees higher than those stated in Exhibit C of the Factoring Agreement. In December 2012, WSS sold its assets and stopped sending accounts receivable to ARA.

On June 5, 2014, WSS filed this action. Count 3 of the complaint alleges ARA breached the contract by charging administrative fees higher than those stated in the Factoring Agreement. Count 7 seeks an accounting for the funds ARA collected on the accounts receivable. ARA answered and filed a counterclaim for breach of contract, alleging that WSS breached its contractual obligation to provide thirty days' written notice prior to terminating the Factoring Agreement. On April 10, 2015, ARA moved for summary judgment with respect to Counts 3 and 7 of the complaint and ARA's counterclaim.

For the reasons provided below, the motion is granted with respect to Count 7 of the complaint and denied in all other respects.

STANDARD

Summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). To support an assertion that a fact cannot be or is genuinely disputed, a party must cite "to particular parts of materials in the record, " show "that the materials cited do not establish the absence or presence of a genuine dispute, " or show "that an adverse party cannot produce admissible evidence to support the fact." Fed.R.Civ.P. 56(c)(1)(A)-(B). "The court need consider only the cited materials, but it may consider other materials in the record." Fed.R.Civ.P. 56(c)(3). In determining whether summary judgment is appropriate, a court must view facts that the parties genuinely dispute in the light most favorable to the nonmovant, Ricci v. DeStefano, 557 U.S. 557, 586 (2009), and draw all justifiable inferences from the evidence in the nonmovant's favor, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

DISCUSSION

A. Count 3: WSS's Breach of Contract Claim

To prevail on a breach of contract claim under Minnesota law, a plaintiff must show: (1) formation of a contract; (2) performance by plaintiff of any conditions precedent; (3) a breach of the contract by defendant; and (4) damages. Gen. Mills Operations, LLC v. Five Star Custom Foods, Ltd., 703 F.3d 1104, 1107 (8th Cir. 2013).[1] WSS argues that ARA breached the contract by charging administrative fees higher than those in the Factoring Agreement. ARA does not dispute that the administrative fees it charged for over two years were higher than those in the agreement. Instead, ARA argues that the fees in the agreement were modified or waived in favor of a permanent 2.4% rate.

1. Modification

"A modification of a contract is a change in one or more respects, which introduces new elements into the details of the contract... but leaves the general purpose and effect undisturbed." Sokol & Assocs., Inc. v. Techsonic Indus., Inc., 495 F.3d 605, 610 (8th Cir. 2007) (internal quotation marks omitted). Minnesota allows modification of a contract by the parties' acts and conduct. Id. However, "allegations of modifications inconsistent ...


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