ORDER
The above-entitled matter comes before the Court upon Plaintiffs objection to the Report and Recommendation of Chief United States Magistrate Judge Raymond L. Erickson dated June 8, 2010. Plaintiff objects to that portion of the Report and Recommendation that recommends that this Court dismiss claim 1 with prejudice and dismiss that portion of claim 2 that asserts a claim for breach of implied covenant of good faith and fair dealing by terminating the Agreement.
Pursuant to statute, the Court has conducted a de novo review of the record. 28 U.S.C. § 636(b)(1); Local Rule 72.2(b). Based on that review the Court will adopt the Report and Recommendation dated June 8, 2010, with the exception of footnote 5. The deadline to file amended pleadings in this case has not yet been determined, and Plaintiff should have the opportunity to file a formal motion to amend the Complaint as to claim 1.
IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss [Doc. No. 5] is GRANTED. Claim 1 is dismissed without prejudice and Claim 2, to the extent Plaintiff asserts a claim for breach of implied covenant of good faith and fair dealing by terminating the Agreement, is dismissed with prejudice.
REPORT AND RECOMMENDATION
I. Introduction
This matter came before the undersigned United States Magistrate Judge pursuant to a general assignment, made in accordance with the provisions of Title 28 U.S.C. § 636(b)(1)(A), upon the Motion of the Defendant Unified Brand, Inc. (“Unified”), for Partial Dismissal of the Complaint. A Hearing on the Motions was conducted on April 28, 2010, at which time, the Plaintiff Warren E. Johnson Companies (“JCA”) appeared by J. Mark Dady, and John D. Holland, Esqs., and Unified appeared by David R. Crosby, and Elizabeth C. Kramer, Esqs. 1 For reasons which follow, we recommend that Unified’s Motion be granted.
II. Factual and Procedural Background
JCA filed the Complaint on January 22, 2010, in Count I of which it alleges that Unified illegally terminated a Sales Representative Agreement, in violation of the Minnesota Termination of Sales Representative Act, Minnesota Statutes Section 325E.37 (MTSRA). See,
Complaint, Docket No. 1,
at pp. 7-9. In Count II, the Complaint also asserts a claim for a breach of an implied covenant of good faith and
On November 18, 2002, the parties entered into a service Agreement, which is attached to the Complaint. See, Agreement, Docket No. 1-1, Exhibit A In that Agreement, JCA agreed to sell kitchen products that were manufactured by Unified, in exchange for commissions. Id. Pertinent to the issues, which are raised by the Motion, are three (3) terms of the contract: 1) that the Agreement could be terminated “with or without good cause” by either party, with thirty (30) days notice; 2) that the “Agreement will be construed in accord with the laws of Mississippi;” and, according to Unified, and not disputed by JCA, 3) that modifications to the Agreement must be in a signed writing. Id. at pp. 6 ¶ 9, 8 ¶ 13, and 7 ¶ 11. Unified terminated the Agreement, effective December 31, 2009, by letter dated November 16, 2009. See, Letter, Complaint, Docket No. 1-2, Exhibit B.
In its Motion for Partial Dismissal, Unified seeks to dismiss Count I, and that part of Count II which is related to the termination of the Agreement. See, Memorandum in Support of Motion to Dismiss (‘Memo in Support”), Docket No. 7, at p. 1 of 7. In support of the Motion, Unified contends that the Agreement expressly provides that Mississippi law will govern, and that, therefore, JCA has no cause of action under the MTSRA. Id. at pp. 3-5 of 7. Unified also seeks a dismissal of the relevant portion of Count II, and contends that JCA’s claim for a breach of good faith and fair dealing cannot be sustained, because Unified assertedly abided by the express terms of the Agreement, in sending a letter notifying JCA of the termination, and by allowing more than thirty (30) days notice. Id. at pp. 5-7 of 7.
In its Response, JCA proffers a number of alternative arguments. See, Memorandum in Opposition to Motion to Dismiss (“Memo in Opp.”), Docket No. 1L First, JCA argues that the choice of law provision — that the Agreement will be construed according to Mississippi law — is too narrow to abrogate the rights and obligations of both parties in their “relationship,” under Minnesota statutory law — in particular, the MTSRA. Id. at pp. 8-13 of 24. JCA argues, in the alternative, that the choice of law provision is ambiguous, and should be construed against Unified, as the drafter of the Agreement, id. at pp. 13-15 of 24; that JCA did not voluntarily waive its rights under the MTSRA by signing the Agreement, id. at pp. 15-16 of 24; and that, even if Mississippi law applies, the Courts of Mississippi “honor[] the legislative enactments of other jurisdictions,” when they are not contrary to Mississippi statutory law, such that the MTSRA claim would not necessarily be unavailable under Mississippi law. Id. at pp. 16-19 of 24. JCA does not argue that the application of Mississippi law would be unconstitutional under the circumstances here.
With respect to Count II, JCA argues that several years after the Agreement was signed, Unified began a “probation
In its Reply, Unified urges that the choice of law provision is no narrower than other provisions which have been enforced to preclude claims under the MTSRA. See, Reply, Docket No. 15, at pp. 2-5 of 9. Unified also argues that the choice of law issue is governed by Minnesota law, and not Mississippi law, and that the MTSRA is not available under Mississippi’s substantive law. Id. at pp. 5-6 of 9. In addition, Unified maintains that the Agreement expressly provides that all modifications must be in a signed writing, and therefore, the creation of the probation program, as alleged, could not modify the terms of the Agreement. Id. at pp. 7-8 of 9.
III. Discussion
A.
Standard of Review.
“When reviewing a Rule 12(b)(6) dismissal for failure to state a claim, we look only to the facts alleged in the complaint and construe those facts in the light most favorable to the [nonmoving party].”
Riley v. St. Louis County,
“Nevertheless, dismissal under Rule 12(b)(6) serves to eliminate actions which are fatally flawed in their legal premises and designed to fail, thereby sparing litigants the burden of unnecessary pretrial and trial activity.”
Young v. City of St. Charles,
supra at 627, citing
Neitzke v. Williams,
B. Legal Analysis. Since they involve different factual and legal considerations, we separately address Unified’s effort to dismiss Count I and Count II.
1.
Unifted’s Motion to Dismiss Count I.
As we have detailed, Count I of the Complaint raises a claim under the MTSRA, even though the Agreement at issue contains a choice of law provision, which selects the laws of Mississippi to govern the construction of the Agreement. Irrespective of that provision, “[a] federal court sitting in diversity must apply the choice of law principles of the state in which it sits.”
Florida State Bd. of Admin. v. Engineering and Environmental Services, Inc.,
“Minnesota traditionally enforces parties’ contractual choice of law provisions [and] Minnesota courts have consistently expressed a commitment to the rule ‘that the parties, acting in good faith and without an intent to evade the law, may agree that the law of either state shall govern.’ ”
Hagstrom v. American Circuit Breaker Corp.,
Here, JCA attached a copy of the Agreement to its Complaint, and Paragraph 13 of that Agreement expressly provides that the “Agreement will be construed in accord with the laws of Mississippi.”
Agreement,
supra at p. 8 ¶ 13. In support of its Motion to Dismiss, Unified relies upon
Hagstrom v. American Circuit Breaker Corp.,
supra, and
Automated Telemarketing Services v. Aspect Software, Inc.,
We find that, under Minnesota law, the claim that JCA asserts under the MTSRA falls within the purview of the choice of law provision in the Agreement. The Court of Appeals for the Eighth Circuit, applying Minnesota law, has held that
Minnesota Courts have not addressed the holding in
Northwest,
but Courts in the District of Minnesota, and in the Eighth Circuit, have applied that holding a number of times. See,
Holden Farms, Inc. v. Hog Slat, Inc.,
In addition, the holding in
Northwest
is consistent with the Minnesota Courts’ ap
In particular, the presence or absence of “good cause” for Unified’s termination of the Agreement is necessarily predicated upon our determination of what JCA’s obligations were, under the Agreement, and whether JCA adequately met those obligations. To decide that issue, the Court plainly needs to interpret the terms of the Agreement, that are related to JCA’s required performance. As a consequence, the claim for wrongful termination, under the provisions of the MTSRA, is closely related to the contract’s terms, and falls well within the purview of the choice of law clause. See, Northwest Airlines, Inc. v. Astraea Aviation Services, Inc., supra at 1392; Florida State Board of Administration v. Law Engineering and Environmental Services, Inc., supra at 1013-14 (finding claims of negligence, breach of fiduciary duty, and negligent misrepresentation, were closely related to the contract, because they were based upon promises made in, and duties under, that contract); Holden Farms, Inc. v. Hog Slat, Inc., supra at 1061 (finding negligent design and negligent misrepresentation claims closely related to the contracts since, whether the negligent misrepresentation occurred, required an “analysis of whether the contract included” the stated warranties, and what those warranties meant.); Evangelical Lutheran Church in America Bd. of Pensions v. Spherion, supra at *1-2 (concluding that claims of fraud and fraudulent inducement were closely related to the interpretation of the contract, because they were predicated upon an agreement being made, and the Court would need to interpret that agreement).
Our conclusion, that the choice of law clause applies to the tort claim under the MTSRA, is consistent with the Minnesota Court of Appeal’s holding, in Hagstrom v. American Circuit Breaker Corp., supra at 48-49, that the MTSRA claim, which was asserted there, could not survive because of a valid contractual choice of law provision selecting North Carolina law — although the Court did not address the scope of the clause directly — and is also consistent with Automated Telemarketing Services v. Aspect Software, Inc., supra at *1, where the Court dismissed the MTSRA claim due to the parties’ election to apply Georgia law, although, once again, the Court did not discuss the scope of that clause.
Further, the Complaint — and JCA’s Response to the Motion — fails to include any allegation, or argument, that the choice of law clause is invalid for any reason and, notably, JCA has made no assertion of bad faith, on the part of Unified, or that Unified attempted to evade Minnesota law with respect to the selection of Mississippi law. See, Hagstrom v. American Circuit Breaker Corp., supra at 48 (“Minnesota courts have consistently expressed a commitment to the rule ‘that the parties, acting in good faith and without an intent to evade the law, may agree that the law of either state shall govern.’ ”) [internal citations omitted]. 5
Further, in
Northwest,
the choice of law clause stated that the “Agreement shall be deemed entered into within and shall be governed by and interpreted in accordance with the laws of the State of Minnesota * * * ”, and there, the Court determined that claims related to negligent performance fell “within the ambit” of that clause.
Northwest Airlines, Inc. v. Astraea Aviation Services, Inc.,
supra at 1389. Additionally, neither of the clauses in
Hagstrom,
or
Northwest,
provided that the choice of law clause applied to the “rela
In the alternative, however, JCA argues that the choice of law clause is ambiguous, since, according to JCA, it can reasonably be interpreted to either exclude, or include, the tort claim at issue here, and therefore, in accordance with the principles of contract construction, that ambiguity should be resolved in JCA’s favor, in order to exclude all tort actions from choice of law clause, and so as to permit JCA’s claim under the MTSRA. However, JCA has not cited to any case in which the Court found a choice of law clause to be ambiguous, and notably, none of the cases cited by either party, or discovered during our independent research, analyze whether such a clause could be ambiguous, with the exception of Heating & Air Specialists, Inc. v. Jones, supra at 930, which mentions the possibility of an ambiguity only in passing.
By way of comparison, in
Mastrobuono v. Shearson Lehman Hutton, Inc.,
Moreover, the issue of ambiguity strikes us as being beside the point. The language of the choice of law provision is clear, and undisputed: the clause applies to “the Agreement.” However, the question we address, under the Northwest analysis, is whether the claim that JCA seeks to prosecute against Unified, for improper termination of the Agreement in the alleged absence of “good cause,” under the MTSRA, is so closely related to the terms of “the Agreement,” that the claim falls within the ambit of the choice of law clause — a question that we have answered in the affirmative.
JCA further argues, in the alternative, that the choice of law clause should not be applied to bar its claim under the MTSRA, because JCA did not voluntarily waive its rights under that statute, by entering into the Agreement. The argument is based upon JCA’s assertion that it did not understand the clause to apply to anything beyond the strict construction of the contract’s terms, and any claims that might be raised in contract law. Given the circumstances, here, our analysis of whether a party can effectively waive its rights, under the MTSRA, by electing to apply another State’s laws to a sales representative agreement, is governed by the Minnesota Court of Appeals’ decision in Hagstrom v. American Circuit Breaker Corporation, supra.
In
Hagstrom,
the Court reasoned that, because there is no provision in the MTSRA, that renders void those choice of law clauses which exclude actions under the MTSRA, parties can waive the rights afforded by the MTSRA, by agreeing to a choice of law clause which elects another State’s laws. See
Hagstrom v. American Circuit Breaker Corporation,
supra at 48-49; see also,
A.J. Lights, LLC v. Synergy Design Group, Inc.,
In its final alternative argument, as to Count I, JCA urges us to find that, even if Mississippi law applies to the relationship between the parties, Mississippi’s choice of law jurisprudence would allow the claim under the MTSRA to proceed. JCA does
Even if we were to apply Mississippi’s choice of law jurisprudence, as JCA urges us to do, the case that JCA relies upon, in order to support its argument that Mississippi Courts would permit the MTSRA claim to proceed, does not involve a contractual choice of law clause. See,
Boardman v. United Services Automobile Association,
Under Minnesota law, JCA and Unified contracted to apply Mississippi law to the Agreement, and the claim, which JCA attempts to raise under the MTSRA, is so related to the Agreement that the choice of Mississippi law applies to that claim as well, and precludes JCA’s attempt to invoke the protections of the MTSRA. As a consequence, we recommend that the Motion to Dismiss be granted as to Count I of the Complaint.
2. Unified’s Motion to Dismiss a Portion of Count II. Unified also moves the Court to dismiss that portion of Count II which raises a claim for a breach of the implied covenant of good faith and fair dealing, as it relates to Unified’s termination of the Agreement. Unified contends that, under Mississippi law, a party cannot act in bad faith when its actions are undertaken according to its rights under a contract. JCA does not dispute this characterization of Mississippi law, but rather, JCA argues that the Agreement was modified by Unified’s creation of a “probation program,” and that the failure to conform to that program breached the implied covenant. We find the argument unpersuasive under the circumstances presented here.
The Agreement contains a clause which provides that all modifications to the Agreement must be in writing.
9
In Mis
We recognize that, under Mississippi law, “[t]he question of whether or not the parties waived the requirement of writing [for a modification] is a jury question,”
Singing River Mall Co. v. Mark Fields, Inc.,
supra at 946, and a merger clause “funetion[s] only to extinguish prior or contemporaneous modifications to the formation” of the contract,
id.
at 947. Here, however, although JCA argues, in ■ conclusory terms, that “the parties modified their agreement to require that Unified Brands place JCA on probation and give JCA an opportunity to cure any alleged deficiencies in its performance prior to Unified Brands exercising its purported contractual right to terminate,” see,
JCA’s Memorandum in Opposition, Docket No.
14, at p. 21 of 24, the Complaint contains no such allegation, no allegation that the written modification requirement was waived, and no assertion that the probation program modified the Agreement. Moreover, JCA attached the Agreement to the Complaint as written, with no addendums, no attached papers related to the probation program and, in fact, no allegation that the terms of the Agreement had been modified or altered at all. See,
Complaint,
supra at p. 4 of 11 (“A true and correct copy of the Sales Representative Agreement is attached hereto * * *.”)[emphasis added], and Exhibit A.
10
Indeed, the
Instead, the Complaint simply alleges that Unified created the probation program, and did not place JCA on the program before terminating the Agreement. While JCA argues that we are required to infer that Unified put at least one of its sales representatives on the probation program — an “inference” we are not reasonably required to make — JCA has failed to explain, through case law or otherwise, why Unified’s conduct, with respect to a third party, would alter the written terms of the Agreement, which Unified and JCA reached. As a consequence, since JCA has failed to allege that the Agreement was modified, and has failed to allege the elements of contract formation relating to a purported modification, under Mississippi law, see,
Singing River Mall Co. v. Mark Fields, Inc.,
supra at 947;
Heritage Bldg. Property, LLC v. Prime Income Asset Management, Inc.,
supra at 1142-43; see also, e.g.,
Hunt v. Coker,
As we have noted, the Agreement provides that either party can terminate it with or without good cause, with 30 days notice. The termination letter, which is also attached to the Complaint, is dated November 16, 2009, and notified JCA that the effective date of termination would be December 31, 2009, more than 30 days later, thereby complying with the terms of the Agreement. Accordingly, based upon the allegations of the Complaint, the terms of the Agreement and the termination letter, and Mississippi law, we find that JCA has failed to state a cognizable claim that Unified breached an implied covenant of good faith and fair dealing with respect to the termination of the Agreement. See,
Limbert v. Mississippi Univ. for Women Alumnae Ass’n, Inc.,
Alternatively, JCA argues that, in developing the probation program, Unified altered the parties’ “reasonable expectations” under the contract and, by failing to abide by those expectations, Unified breached its duty of good faith and fair dealing, but we find no merit in the argument. JCA cites to Mississippi case law, which holds that good faith is defined as
Accordingly, finding that Count I, and the portion of Count II that is related to Unified’s termination of the Agreement, fail as a matter of law, we recommend that Unified’s Motion to Dismiss those claims be granted.
NOW, THEREFORE, It is—
RECOMMENDED:
That the Defendant’s Motion for Partial Dismissal of the Complaint [Docket No. 5] be granted.
Notes
. At the Hearing, counsel for Unified advised that there were responses, by JCA, to Unified's Requests for Admissions, as well as its Interrogatories, which had a bearing on the issues before the Court, and we permitted Unified to submit those responses, by May 7, 2010. Unified submitted those responses on May 3, 2010, see, Letter, Docket No. 20, and we took the Motion under advisement as of that date.
. Unified does not seek to dismiss Count II, at least as that Count is related to Unified’s alleged conduct with respect to the Famous Dave's order. See, Unified’s Memorandum in Support of Motion ("Memo in Support"), Docket No. 7, at pp. 1-2 n. 2.
. We recognize that the "no set of facts” standard, in reviewing Motions to Dismiss, was abrogated by the Supreme Court in
Bell Atlantic Corp. v. Twombly,
. In
Florida State Board of Administration v. Law Engineering and Environmental Services, Inc.,
Of course, given the choice of law provision in the Agreement, the question remains as to whether, in determining the scope of that choice of law clause, we are required to apply Mississippi law — an issue that the Courts in our District have answered in the negative. In Florida State Board, the Court held that, "[i]n determining whether a choice of law provision in the parties' agreement will be given effect, a federal court sitting in diversity looks to the choice of law principles of the forum state[.]". Florida State Bd. of Administration v. Law Engineering and Environmental Services, Inc., supra at 1012. Accordingly, we apply Minnesota law in deciding the scope of a choice of law clause, inclusive of the cases in our Circuit, and District, which apply Minnesota law.
. At the Hearing, JCA requested leave to amend the Complaint, in order to allege that
As a consequence, we find that the requested leave to amend the Complaint, so as to allege that the choice of law clause was an act of bad faith, would be futile, as JCA has presented the Court with nothing, other than its conclusory assertion, which could support an assertion that Unified acted to evade Minnesota law, or in bad faith. See,
Foman v. Davis,
Notably, JCA did not respond to Unified's submission of JCA's discovery responses, so as to so much as suggest that newly discovered information would alter or amend those discovery responses.
. In its Reply, Unified also attempts to distinguish Heating & Air Specialists, Inc. v. Jones, supra, by arguing that "interpretation” is more narrow than "construction.” See, Reply, Docket No. 15, at p. 5-6 of 9. Given that Black's Law Dictionary defines "construction,” in relevant part, as "[t]he act or process of interpreting or explaining the sense or intention of a writing * * * [or] the ascertainment of a document’s meaning * * see, Black’s Law Dictionary 355 (9th Ed.2009), and defines "interpretation” as "[t]he process of determining what something * * * means,” id. at 894, the distinction espoused by Unified is unavailing, and unnecessary, as the Court did not apply Minnesota law in Heating & Air Specialists v. Jones, supra.
. In
Fredin v. Sharp,
. We are not persuaded by JCA’s argument, that the scope of the choice of law clause is a question of fact, which cannot be determined on a Motion to Dismiss, because the Court is obligated to interpret an unambiguous contract. See,
Porous Media Corp. v. Midland Brake, Inc., 220
F.3d 954, 959 (8th Cir.2000)("The meaning of an unambiguous contract is a matter of law for the court * * *; however, the meaning of an ambiguous contract term is a fact question for the jury.”)[internal citations omitted];
Murray v. Puls,
. The integration clause of the Agreement provides that Unified "may, in its sole discretion and by thirty (30) days prior notice, make such changes pursuant to authority which it has reserved herein, including, without limitatión, changing the description of the Sales Representative Territory in Section 2 above, and changing the commission percentages referred to in Section 5 above * * * [and] [e]xcept for the foregoing amendments by [Uni
. The Mississippi cases, which JCA cites to support its argument that the Agreement was modified by conduct, by way of Unified's creation of the probation program, are inapposite, since none of them involve contracts that contained no-oral-modification clauses. See,
Anderton
v.
Business Aircraft, Inc.
. We also find that the Court’s opinion, in
Cenac v. Murry,