Warren E. Johnson Companies v. Unified Brand, Inc., Civ. No. 10-196 (MJD/RLE)

735 F.Supp.2d 1099

WARREN E. JOHNSON COMPANIES, d/b/a Johnson Commercial Agents, Plaintiff,

v.UNIFIED BRAND, INC., f/k/a DI Foodservice Companies, Defendant.

Civ. No. 10-196 (MJD/RLE).

United States District Court, D. Minnesota.

Aug. 4, 2010.

J. Mark Dady, John D. Holland, Dady & Gardner, PA, Minneapolis, MN, for Plaintiff.

Elizabeth C. Kramer, David R. Crosby, Leonard Street and Deinard, PA, Minneapolis, MN, for Defendant.

ORDER

MICHAEL J. DAVIS, Chief Judge.

The above-entitled matter comes before the Court upon Plaintiff's 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

RAYMOND L. ERICKSON, United States Chief Magistrate Judge.

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 andfair dealing, which is both related to the termination of the Agreement, and to Unified's conduct just prior to the effective date of termination, with respect to a potential order from a Famous Daves' restaurant.²Id. at pp. 9-11. In its Answer, which was filed after the filing of Unified's Motion to Dismiss, Unified denies that it illegally terminated the Agreement, or terminated that Agreement in violation of an implied covenant of good faith and fair dealing. See, Answer, Docket No. 9.

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. 14. 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 "probationprogram," whereby underperforming sales representatives would be notified of their poor performance, and allowed an opportunity to cure, and that the program effectively modified the Agreement by conduct, such that Unified was required to place JCA in the program before terminating the Agreement. Id. at pp. 20-22 of 24.

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, 153 F.3d 627, 629 (8th Cir.1998), cert. denied, 525 U.S. 1178, 119 S.Ct. 1113, 143 L.Ed.2d 109 (1999), citing Double D Spotting Serv., Inc. v. Supervalu, Inc., 136 F.3d 554, 556 (8th Cir.1998); see also, Maki v. Allete, Inc., 383 F.3d 740, 742 (8th Cir.2004). In addition, all reasonable inferences, from the facts alleged in the Complaint, must be drawn in favor of the nonmoving party. See, Maki v. Allete, Inc., supra at 742. "A complaint shall not be dismissed for its failure to state a claim upon which relief can be granted unless it appears beyond a reasonable doubt that plaintiff can prove no set of facts in support of a claim entitling him to relief." ³ Young v. City of St. Charles, 244 F.3d 623, 627 (8th Cir.2001), citing Breedlove v. Earthgrains Baking, 140 F.3d 797, 799 (8th Cir.1998), cert. denied, 525 U.S. 921, 119 S.Ct. 276, 142 L.Ed.2d 228 (1998); see also, Maki v. Allete, Inc., supra at 742; Helleloid v. Independent School Dist. No. 361, 149 F.Supp.2d 863, 866-67 (D.Minn.2001).

"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, 490 U.S. 319, 326-27, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989). "To avoid dismissal, a complaint must allege facts sufficient to state a claim as a matter of law and not merely legal conclusions." Id., citing Springdale Educ. Ass'n v. Springdale Sch. Dist., 133 F.3d 649, 651 (8th Cir.1998); see also, Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)("While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligationto provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do."); see also, Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1949, 1951, 173 L.Ed.2d 868 (2009) ("The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully," and cautioning that "[i]t is the conclusory nature of [the plaintiffs'] allegations, rather than their extravagantly fanciful nature, that disentitles them to the presumption of truth.").

B. Legal Analysis. Since they involve different factual and legal...