Thurston Enters., Inc. v. Safeguard Bus. Sys., Inc.
164 Idaho 709
| Idaho | 2019Background
- Thurston Enterprises had an exclusive distributor agreement (1987 RDA with Attachments/Addenda) giving it account-protection rights: commissions on all sales of "Safeguard Systems" to customers whose first Safeguard purchase in Thurston's territory was credited to Thurston, with a 36‑month renewal window.
- Deluxe (which purchased SBS) and SBS instituted a BAM acquisition program acquiring DocuSource and IBF (2013–2014), distributors who shared customers with Thurston. SBS reviewed customer lists but did not disclose IBF/DocuSource post‑acquisition sales to Thurston.
- In March 2014 Thurston sold commission rights to nine accounts to SBS for $32,600; Thurston later claimed he would have charged much more had he known IBF’s sales.
- Thurston sued SBS (after joining an earlier T3 suit) for breach of contract, breach of implied covenant, fraud in inducement (re: March 2014 sale), tortious interference, conversion and accounting; the district court granted partial summary judgment for Thurston on account‑protection breach.
- A jury awarded Thurston compensatory damages totaling ~$1.625M (broken down among claims), punitive damages of $4.75M (reduced statutorily to ~$4.408M), for a judgment of ~$6.034M; district court later awarded attorney fees; SBS appealed and sought post‑judgment relief which the district court denied.
Issues
| Issue | Thurston's Argument | SBS's Argument | Held |
|---|---|---|---|
| Whether account‑protection clause was breached as a matter of law | Account protection covers all sales of any Safeguard System to protected customers once Thurston earned the first order; SBS must rotate commissions | Clause should be read product‑specific; account protection limited to the specific product first solicited | Court: clause unambiguous; covers all Safeguard Systems sales to protected customers; summary judgment for Thurston affirmed |
| Admissibility / attorney‑client privilege for documents | Documents were properly ordered produced and admitted; admission was stipulated at trial | Privilege protected many documents; district court erred in forcing production | SBS waived appellate review by stipulating to admission at trial; privilege objection waived |
| Fraud in inducement (March 2014 sale) | SBS concealed post‑acquisition IBF/DocuSource sales; Thurston reasonably relied and was damaged | Thurston knew lack of IBF sales figures and negotiated anyway; no justifiable ignorance | Jury verdict sustained: substantial evidence supports fraud finding; post‑judgment relief denied |
| Breach of pricing schedule (preferential pricing) | SBS gave preferential base pricing to acquired distributors in violation of agreement | Agreement did not guarantee uniform pricing among distributors; testimony contradicted plaintiff | Jury verdict sustained: sufficient evidence supported breach and damages award |
| Breach of implied covenant; business devaluation damages | SBS’s breaches (account protection, pricing) materially impaired benefit of contract; distributorship value dropped (owner testimony and market metrics) | Claim duplicative/contradicted by contract terms; damages speculative and novel mid‑trial theory | Evidence (including owner testimony and SBS valuation metrics) supported two‑thirds diminution; judgment affirmed |
| Punitive damages for breach of contract | SBS concealed breaches and systematically avoided rotating commissions; conduct was oppressive/fraudulent | Punitive damages improper in ordinary commercial breach; conduct not extreme | Jury award supported by clear and convincing evidence of concealment/deception; punitive damages upheld; Court declines to restrict punitive damages for commercial breaches |
| Future damages (lost future commissions) | Expert used one‑times annual revenue metric (equating to ~3 years) based on SBS’s own valuation practice; compensable under contract | Expert overstated period (claimed 8 years), ignored attrition and at‑will termination risk; speculative | Substantial evidence supported expert methodology and award; future damages sustained |
| Attorney fees on appeal | Thurston sought fees under I.C. §12‑120(3) and §12‑121 | SBS also sought fees or reduction of trial fee award | Thurston as prevailing party on appeal entitled to fees under §12‑120(3); prior fee award not disturbed |
Key Cases Cited
- Lincoln Land Co., LLC v. LP Broadband, Inc., 163 Idaho 105, 408 P.3d 465 (Idaho 2017) (standard of review for summary judgment)
- Quick v. Crane, 111 Idaho 759, 727 P.2d 1187 (Idaho 1986) (standard for judgment notwithstanding verdict / directed verdict)
- Schwan's Sales Enterprises, Inc. v. Idaho Transp. Dep't, 142 Idaho 826, 136 P.3d 297 (Idaho 2006) (review principles for JNOV and weighing evidence)
- Knipe Land Co. v. Robertson, 151 Idaho 449, 259 P.3d 595 (Idaho 2011) (patent vs. latent contract ambiguity)
- Myers v. Workmen's Auto Ins. Co., 140 Idaho 495, 95 P.3d 977 (Idaho 2004) (punitive damages not categorically barred in contract cases; standards)
- Saint Alphonsus Diversified Care, Inc. v. MRI Associates, LLP, 157 Idaho 106, 334 P.3d 780 (Idaho 2014) (preservation of evidentiary objections and waiver principles)