Energy Creates Energy, LLC and Genesys Industrial Corp. v. The Heritage Group
2016 Mo. App. LEXIS 1167
Mo. Ct. App.2016Background
- Genesys (developer of a carpet-shredding machine) and its subsidiary ECE contracted with Heritage entities under a comprehensive May 2011 Purchase/License/Commercialization agreement (HEPLC) that included warranties and an arbitration clause.
- Relationship broke down; Heritage initiated arbitration (claiming warranty breach, fraud, tortious interference, unjust enrichment); ECE/Genesys counterclaimed (breach, trade-secret misappropriation, fraud, interference, declaratory relief).
- Arbitrator (Jan–Feb 2014 hearing) found ECE/Genesys liable on one warranty claim, rescinded the contract, ordered return of shredders and $3,000,000; denied most other claims and counterclaims; award entered as judgment in federal court.
- Genesys/ECE then sued in Missouri state court (21-count petition) asserting additional claims they said fell outside arbitration. Heritage moved to dismiss based on claim/issue preclusion, attaching arbitration materials.
- Trial court converted the motion to summary judgment but did not require the parties to follow Rule 74.04 procedures (no statement of uncontroverted facts, limited time to respond, barred additional evidence); the special master recommended, and the court adopted, summary judgment in favor of Heritage on multiple counts and partial summary judgment on others.
- On appeal, the Missouri Court of Appeals reversed the grant of summary judgment (full and partial) because the conversion proceeded without compliance with Rule 74.04 and Genesys/ECE had not waived those procedural protections; Heritage’s cross-appeal was dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether motion-to-dismiss conversion required full Rule 74.04 compliance | Genesys/ECE: conversion required full Rule 74.04 procedures (statement of facts, exhibits, time to respond); failure prejudiced them | Heritage: presenting arbitration materials justified conversion and procedural shortcuts; waiver applies when parties submit extra-pleading materials | Court: Conversion was proper but Rule 74.04 compliance is mandatory absent waiver; Genesys/ECE did not waive; summary judgment reversed |
| Whether trial court could rely on arbitration award for claim/issue preclusion without developing a proper summary-judgment record | Genesys/ECE: record was undeveloped; factual disputes existed and appellate review was impossible | Heritage: arbitration record established preclusion as a matter of law | Court: trial court abused process by not requiring Rule 74.04; undeveloped facts preclude summary disposition |
| Whether Genesys/ECE waived objection to Rule 74.04 by submitting materials or failing to object | Genesys/ECE: repeatedly objected and demanded Rule 74.04; no waiver | Heritage: cases permit waiver when both parties present outside-pleading materials | Court: no waiver here because Genesys/ECE consistently objected; Wilson limited to mutual acquiescence situations |
| Reviewability of denial-of-summary-judgment cross-appeal by Heritage | Heritage: appealed denial/partial denial of summary judgment on several counts | Genesys/ECE: not directly addressed as appeal of final judgment prevailed | Court: denial of summary judgment is not appealable; cross-appeal dismissed |
Key Cases Cited
- ITT Commercial Fin. Corp. v. Mid–Am. Marine Supply Corp., 854 S.W.2d 371 (Mo. banc 1993) (standard and purposes of Rule 74.04; summary judgment requires undeveloped facts to be narrowed)
- State ex rel. Nixon v. Hughes, 281 S.W.3d 902 (Mo. App. W.D. 2009) (Rule 74.04 compliance is mandatory; courts should not sift records for disputed facts)
- Wilson v. Cramer, 317 S.W.3d 206 (Mo. App. W.D. 2010) (parties may waive Rule 74.04 procedural requirements by mutual submission of outside-pleading materials without objection)
- Rodgers v. Threlkeld, 22 S.W.3d 706 (Mo. App. W.D. 1999) (insufficiently developed factual record requires denial of summary judgment)
- Lackey v. Iberia R-V School District, 487 S.W.3d 57 (Mo. App. S.D. 2016) (summary judgment motions must set forth material facts in numbered paragraphs and reference the record)