TENSION ENVELOPE CORPORATION Plaintiff-Appellant v. JBM ENVELOPE COMPANY; Marcus G. Sheanshang; Daniel J. Puthoff Defendants-Appellees
No. 16-3728
United States Court of Appeals, Eighth Circuit.
Submitted: September 20, 2017. Filed: December 8, 2017
876 F.3d 1112
Curtis Calloway, Lewis & Rice, Saint Louis, MO, Scott Andrew Wissel, Lewis & Rice, Kansas City, MO, Amy L. Hunt,
Richard Stuart Wayne, Strauss & Troy, Cincinnati, OH, for Defendants-Appellees.
Before WOLLMAN, MELLOY, and GRUENDER, Circuit Judges.
GRUENDER, Circuit Judge.
Tension Envelope Corporation sued a former supplier, JBM Corporation, for selling directly to its customers after promising not to do so. The district court1 rejected one claim on the pleadings and the others on summary judgment. We affirm the district court‘s rulings.
I.
Tension and JBM manufacture and sell envelopes. In late 2000 or 2001, Tension began buying from JBM a special type of envelope—small, open-end envelopes2—to resell to customers. Three of Tension‘s customers accounted for a significant percentage of the sales.
According to Tension, JBM offered assurances that it would not sell directly to Tension‘s customers. On three separate occasions, however, JBM refused to sign a non-compete agreement. After these refusals, Tension continued to order envelopes from JBM with individual purchase orders. Tension even leased its manufacturing
Although JBM had sold some envelopes to end users since at least 2001, JBM‘s new management in 2011 decided to increase direct sales. By 2014, JBM decided to sell directly to Tension‘s customers. JBM hired a communications consultant to help with the strategy. The strategy worked, and by June 2014, JBM reached agreements with two of Tension‘s three large customers. JBM later tried to sell to the third large customer‘s customers. Tension learned of the agreements—though it earlier had suspected something was afoot—and struggled to find a new supplier.
Tension filed its complaint in June 2014. It later filed three amended complaints and named JBM and two of JBM‘s corporate officers (collectively “JBM“) as defendants. The district court dismissed under
II.
On appeal, Tension advances seven arguments. Six relate to the district court‘s summary judgment grant. Tension argues that the district court erred in granting summary judgment on its claim for (1) breach of contract, (2) promissory estoppel, (3) fraudulent misrepresentation, (4) fraudulent nondisclosure, (5) tortious interference, and (6) unfair competition. Tension‘s final argument relates to the district court‘s dismissal under
We will address each claim in turn and review de novo the district court‘s rulings. See Turner v. Holbrook, 278 F.3d 754, 757 (8th Cir. 2002). In reviewing the motion to dismiss, we accept “well-pleaded allegations in the complaint as true” and draw “all reasonable inferences in favor” of Tension. See Schriener v. Quicken Loans, Inc., 774 F.3d 442, 444 (8th Cir. 2014). In reviewing the grant of summary judgment, we ask whether “there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law.” Turner, 278 F.3d at 757 (citing
A. Breach of Contract
Tension first argues that JBM breached a requirements contract in selling directly to its customers. Under Missouri law, a requirements contract is “one in which one party promises to supply all the specific goods or services which the other party may need during a certain period at an agreed price, and the other party promises that he will obtain his required goods or services from the first party exclusively.” Essco Geometric v. Harvard Indus., 46 F.3d 718, 728 (8th Cir. 1995) (emphasis omitted) (quoting Kirkwood-Easton Tire Co. v. St. Louis Cty., 568 S.W.2d 267, 268 (Mo. 1978) (en banc)). Tension contends that the purported contract required JBM “to use its best efforts to supply the envelopes” to Tension and provide “reasonable notice” before terminating the agreement. According to Ten-
The district court concluded that no enforceable requirements contract existed between the two companies, see Tension Envelope Corp. v. JBM Envelope Co., No. 14-567-CV-W-FJG, at 19 (W.D. Mo. Aug. 22, 2016), and we agree. Under the Missouri statute of frauds, and with exceptions not relevant here,
a contract for the sale of goods for the price of five hundred dollars or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker.
Tension attempts to do so with two documents. The first is a letter from JBM‘s president to a Tension representative stating that “Tension and JBM have a partnership in which Tension has shared machinery and knowledge with JBM.” The second document is a promotional piece noting that “[o]ver the years, the relationship and trust between Tension and JBM has grown into a partnership.”
These documents do not satisfy the statute of frauds. Recall that a requirements contract is “one in which one party promises to supply all the specific goods or services which the other party may need during a certain period at an agreed price, and the other party promises that he will obtain his required goods or services from the first party exclusively.” Essco Geometric, 46 F.3d at 728 (emphasis omitted). Tension‘s proffered documents do “not contain any terms” referencing those elements. See Howard Const. Co. v. Jeff-Cole Quarries, Inc., 669 S.W.2d 221, 230 (Mo. Ct. App. 1983). Tension points to testimony supporting its favored interpretation of the word “partnership,” but we cannot consider oral evidence in determining “whether the statute of frauds requirements have been been met.” See id. at 229. Without that evidence and without any documents beyond those containing bare references to “partnership,”4 we cannot conclude that Tension has satisfied the statute of frauds. As a result, Tension and JBM have no enforceable requirements contract as a matter of law.
B. Promissory Estoppel
Tension next seeks relief under the doctrine of promissory estoppel, but the Missouri statute of frauds bars this claim as well. When the statute of frauds bars a contract claim, allowing recovery based on Missouri‘s promissory estoppel “would abrogate the purpose and intent of the legislature in enacting the statute of frauds and would nullify its fundamental requirements.” Sales Serv., Inc. v. Daewoo Int‘l Corp., 770 S.W.2d 453, 457 (Mo. Ct. App. 1989). “In fact,” one district court
C. Fraudulent Misrepresentation
Tension also brings a claim for fraudulent misrepresentation. That claim has nine elements under Missouri law:
(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker‘s knowledge of its falsity or ignorance of its truth; (5) the speaker‘s intent that it should be acted on by the person in the manner reasonably contemplated; (6) the hearer‘s ignorance of the falsity of the representation; (7) the hearer‘s reliance on the representation being true; (8) the hearer‘s right to rely thereon; and (9) the hearer‘s consequent and proximately caused injury.
Freitas v. Wells Fargo Home Mortg., Inc., 703 F.3d 436, 438-39 (8th Cir. 2013). “A plaintiff‘s failure to establish any one of the essential elements of fraud is fatal to recovery.” Renaissance Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112, 132 (Mo. 2010) (en banc).
Tension focuses on three alleged misrepresentations. The first concerns JBM‘s 2012 statement that it would be a good partner because it was a “trade only manufacturer.” Whether this statement qualifies as a misrepresentation depends on its meaning—about which some dispute exists. In its opening brief, Tension writes that “references to selling to the ‘trade’ refer to selling to ‘other envelope companies.‘” If Tension sold “only” to the trade, then presumably it would sell “only” to other envelope companies. Tension knew from the beginning of the relationship, however, that JBM sold directly to some end users. Tension‘s chief operating officer acknowledged that he “knew continuously from 2001 to 2014 that [JBM] sold to direct end users.” So if “trade only manufacturer” has the meaning Tension apparently ascribed to it in the briefs, then Tension cannot claim “ignorance of the falsity of the representation.” See Freitas, 703 F.3d at 438-39.
If we instead look to the record, “trade only manufacturer” appears to have a different meaning. Both Tension and JBM state there that “trade-only envelope manufacturers also have direct accounts.” According to Tension, JBM‘s statement that it qualified as a “trade only manufacturer” was a misrepresentation, because JBM possessed a “present intent” in 2012 to cease operating as a trade-only manufacturer. See Sofka v. Thal, 662 S.W.2d 502, 507 (Mo. 1983) (en banc) (noting that a “promise accompanied by a present intent not to perform is... sufficient to constitute actionable fraud” (emphasis omitted)). The record does suggest that as far back as 2011, JBM planned to increase direct sales. But if a “trade only manufacturer” need not sell only to the trade, then it is unclear—at least from Tension‘s briefs—at what point increasing direct sales renders the trade-only designation false. Without a definite meaning for the term, Tension has failed to sufficiently show “falsity.” See Freitas, 703 F.3d at 438-39; see also
Even if Tension did sufficiently show falsity, Tension would have lacked the “right to rely” on the statement. See Freitas, 703 F.3d at 438-39. A “mutual recognition of the uncertainty of a given fact” renders reliance on the asserted fact unjustified. See Empire Gas Corp. v. Small‘s LP Gas Co., 637 S.W.2d 239, 243 (Mo. Ct. App. 1982). That was the conclusion of the Missouri Court of Appeals in Empire Gas, where a seller had reached a written agreement with a buyer delineating their respective rights in the event a particular representation by the seller proved false. See id. at 243-44. If the buyer “did indeed rely upon that particular representation,” the court asked, then “why did it insist upon” the separate agreement? Id. The same logic applies here. Tension repeatedly asked that JBM sign a non-compete agreement, and JBM repeatedly refused. If Tension did indeed rely upon the trade-only manufacturer designation, then why repeatedly insist on a non-compete agreement? These repeated attempts to reach an agreement, and repeated refusals, rendered any reliance unjustified as a matter of law. See id.
The second alleged misrepresentation involved a response to a question. In March 2014, after a Tension representative asked what he could do for JBM, JBM‘s president responded: “Bring us more business.” We cannot see how this constitutes a misrepresentation at all. Nothing supports the proposition that JBM necessarily would have rejected additional business from Tension. Tension emphasizes that a statement conveying a “false impression” can qualify as a misrepresentation under Missouri law. See Wion v. Carl I. Brown & Co., 808 S.W.2d 950, 954-55 (Mo. Ct. App. 1991); see also United Indus. Syndicate, Inc. v. W. Auto Supply Co., 686 F.2d 1312, 1318 (8th Cir. 1982). But even if JBM‘s answer created a false impression—which we doubt—the false impression was that JBM would not compete with Tension. For the reasons already described, Tension had no right to rely on such a representation given JBM‘s repeated refusal to sign a non-compete agreement. See Empire Gas, 637 S.W.2d at 243-44.
The third alleged misrepresentation also involved a response to a question. In June 2014, shortly before JBM approached Tension‘s customers, Tension asked JBM to copy it on all future communications with its customers. JBM‘s president agreed—though he did not follow through. Summary judgment was proper on this claim for a now-familiar reason. By June 2014, Tension suspected that JBM would approach its customers, and especially at this late date, it had no right to rely on a statement suggesting otherwise. See id.; see also Children‘s Broad. Corp. v. Walt Disney Co., 245 F.3d 1008, 1020-21 (8th Cir. 2001) (reaching a similar conclusion under Minnesota law). JBM therefore was entitled to summary judgment on the fraudulent misrepresentation claim. See Anderson, 477 U.S. at 248.5
D. Fraudulent Nondisclosure
Tension‘s claim for fraudulent nondisclosure fares no better. A fraudulent nondisclosure claim involves the same nine elements as a claim for fraudulent misrepresentation, except “a party‘s silence amounts to a representation where the law imposes a duty to speak.” Hess v. Chase Manhattan Bank, 220 S.W.3d 758, 765 (Mo. 2007) (en banc). Tension claims that JBM‘s failure to disclose its plans to in-
In the most analogous Missouri case, however, the court rejected a similar claim. In Blaine v. J.E. Jones Const. Co., home purchasers filed suit against a developer for failing to disclose its plans to build a nearby apartment complex. 841 S.W.2d 703, 704 (Mo. Ct. App. 1992). The Missouri Court of Appeals overturned the jury verdict in favor of the purchasers. Id. In doing so, the court focused on the market effect of a contrary ruling. A “developer‘s decision about developing is not absolute but can and probably will change depending on the marketplace,” it wrote. Id. at 709. “To saddle a developer with an affirmative duty to disclose these decisions as they vary would act as a straight jacket that the marketplace does not need.” Id.; see also Lakeside Feeders, Inc. v. Producers Livestock Mktg. Ass‘n, 666 F.3d 1099, 1108-09 (8th Cir. 2012) (reaching a similar conclusion under Iowa law). That same logic applies here.
In support of a disclosure duty, Tension invokes certain provisions of the Restatement (Second) of Torts § 551. See
Tension‘s other arguments are similarly unpersuasive. It argues that the fraudulent nondisclosure claim presents a fact issue that is “simply part of the ultimate jury question.” See United Indus. Syndicate, Inc. v. W. Auto Supply Co., 686 F.2d 1312, 1319 (8th Cir. 1982). But its sole authority for that proposition predates not only Blaine, but also the trilogy of 1986 Supreme Court cases “which requires courts to treat motions for summary judgment more hospitably.” Chicago Ins. Co. v. Farm Bureau Mut. Ins. Co. of Ark., Inc., 929 F.2d 372, 373 n.4 (8th Cir. 1991). Tension has not raised a fact issue that “might affect the outcome of the suit,” so granting summary judgment was not erroneous. See Anderson, 477 U.S. at 248. In its reply brief, Tension pivots and argues for a disclosure duty on other bases, but those arguments come too late. See Neb. State Legislative Bd., United Transp. Union v. Slater, 245 F.3d 656, 658 n.3 (8th Cir. 2001).
One final reason also supports summary judgment on this claim. Recall that for the fraudulent nondisclosure claim, Tension must establish the same nine misrepresentation elements, except “a party‘s silence amounts to a representation where the law imposes a duty to speak.” See Hess, 220 S.W.3d at 765. In this case, Empire Gas provides an independent reason for granting summary judgment: Given JBM‘s re-
E. Tortious Interference
Tension also claims that JBM committed tortious interference in its attempts to sell directly to Tension‘s customers. “Tortious interference with a contract or business expectancy requires proof of: (1) a contract or valid business expectancy; (2) defendant‘s knowledge of the contract or relationship; (3) a breach induced or caused by defendant‘s intentional interference; (4) absence of justification; and (5) damages.” Nazeri v. Mo. Valley Coll., 860 S.W.2d 303, 316 (Mo. 1993) (en banc). So long as the defendant does not employ improper means—such as threats, violence, trespass, defamation, restraint of trade, or misrepresentation of fact—economic interest provides sufficient justification for an alleged interference. See id. at 316-17; see also Others First, Inc. v. Better Bus. Bureau of Greater St. Louis, Inc., 829 F.3d 576, 579 (8th Cir. 2016).
Tension does not argue that JBM lacked sufficient economic interest. It instead claims that JBM employed improper means. In particular, Tension says that in JBM‘s meetings with its customers, JBM improperly stated that Tension was a dishonest company. Tension‘s sole piece of evidence for this claim, though, is the “Mooney Memorandum“: a document prepared by JBM‘s communications consultant before the meetings took place. Tension emphasizes that JBM reviewed the Mooney Memorandum in preparation for the meetings.
Yet every piece of evidence from individuals at the meetings indicates that JBM representatives did not say the alleged falsehoods suggested in the memorandum. The record contains multiple declarations from non-JBM individuals at the meetings, for example, who affirm that JBM did not disparage Tension. Tension attacks the credibility of these witnesses, but it has offered nothing to support its allegation of dishonesty. See
F. Unfair Competition
The final claim rejected on summary judgment concerns the tort of unfair competition. Missouri courts have described the tort as a “reaffirmation of the rule of fair play” and a protection against companies deceiving the public. See Cushman v. Mutton Hollow Land Dev., Inc., 782 S.W.2d 150, 157-59 (Mo. Ct. App. 1990); see also Am. Equity Mortg., Inc. v. Vinson, 371 S.W.3d 62, 64-65 (Mo. Ct. App. 2012) (describing the doctrine). They have remarked at the doctrine‘s “elusive” nature. See, e.g., Cushman, 782 S.W.2d at 157. Tension argues that JBM committed this tort in “plotting to steal Tension‘s customers.”
G. Misappropriation of Trade Secrets
In its First Amended Complaint, Tension alleged that JBM misappropriated two trade secrets: the “identity of its customers and their unique requirements.” See
The district court did not err in doing so. In Western Blue Print Co. v. Roberts, the Missouri Supreme Court concluded that while the “customers contacts” in that case were “protectable, they are not protectable under a theory of... trade secret.” 367 S.W.3d 7, 18 (Mo. 2012) (en banc). Tension offers no persuasive reason why Western Blue should not apply here. It invokes a Missouri Court of Appeals case for arguably a contrary proposition, see Brown v. Rollet Bros. Trucking Co., 291 S.W.3d 766, 777 (Mo. Ct. App. 2009), but to the extent the decisions conflict, we follow the law as interpreted by the Missouri Supreme Court, see United Fire & Cas. Ins. Co. v. Garvey, 328 F.3d 411, 413 (8th Cir. 2003). Based on Western Blue, the identity of Tension‘s customers is not protectable as a trade secret.
For Tension‘s claim related to its customers’ requirements, no Missouri Supreme Court decision speaks directly to the issue. But the intermediate appellate decision on which Western Blue relied does address the question. In Walter E. Zemitzsch, Inc. v. Harrison, the court noted that information related “to the customers’ individual requirements” was not a trade secret, because it was “information obtainable without recourse to misappropriation.” 712 S.W.2d 418, 421 (Mo. Ct. App. 1986) (alteration omitted) (quoting Metal Lubricants Co. v. Engineered Lubricants Co., 284 F.Supp. 483, 488 (E.D. Mo. 1968), aff‘d., 411 F.2d 426 (8th Cir. 1969)). The same is true here. According to the amended complaint, Tension‘s envelopes complied with technical specifications generated not by Tension, but by the customers themselves. The requirements are “their“—the customers‘—requirements. Tension emphasizes that the amended complaint contains references to manufacturing processes, which could qualify as trade secrets. See Nat‘l Rejectors, Inc. v. Trieman, 409 S.W.2d 1, 18 (Mo. 1966) (en banc). But the amended complaint repeatedly states that the relevant trade secret is the customers’ requirements, and Tension cites no case for the proposition that the customer can generate the protectable information. See, e.g., Conseco Fin. Servicing Corp. v. N. Am. Mortg. Co., 381 F.3d 811, 819 (8th Cir. 2004) (discussing information generated by a seller‘s “proprietary computer program“). Because the requirements are “information which JBM could have acquired from the custom-
III.
For the foregoing reasons, we affirm.
STEVEN M. GRUENDER
UNITED STATES CIRCUIT JUDGE