Opinion
Civil No. 02-4923 (DWF/SRN).
July 25, 2003.
Glen DeValerio, Esq., Berman DeValerio Pease Tabacco Burt Pucillo, Boston, MA, Counsel for Plaintiff.
David L. Shulman, Esq., Shulman Dornbos, Minneapolis, MN, Counsel for Plaintiff.
Robin M. Wolpert, Esq., Steven J. Wells, Esq., Dorsey Whitney, Minneapolis, MN, Counsel for Defendant.
MEMORANDUM OPINION AND ORDER
Introduction
The above-entitled matter came on for hearing before the undersigned United States District Judge on July 7, 2003, pursuant to Defendant's Motion to Dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. This case arises out of Plaintiff Enervations, Inc.'s five counts against Defendant Minnesota Mining Manufacturing Co. ("3M"). The five counts include: breach of contract, breach of contract for unlawful termination, intentional interference with prospective business relations, intentional interference with contract relations, and breach of an implied covenant of good faith and fair dealing. Defendant has moved to dismiss because the five counts are time-barred. For the reasons set forth below, Defendant's motion is granted.
Background
On January 1, 1999, Plaintiff Enervations, Inc. ("Enervations"), entered into an Authorized Distributor Agreement (the "Agreement") with 3M. As an authorized distributor, Enervations sold or marketed 3M window films to dealers within a specified exclusive territory. For purposes of this motion, the most relevant portion of the Agreement is Section 10, which states the dispute resolution procedures and governing law if a dispute should arise between the parties. Subsection A states that Enervations must file any lawsuit against 3M in a state or federal court in Ramsey County. Subsection D provides that the laws of the State of Minnesota govern any dispute. Finally, subsection D bars any breach claim made one year after the later of either the date of the breach or the date that the other party knew or should have known of the breach.
According to the Complaint, between 1999 and 2001, other distributors for 3M made sales within Enervations' exclusive territory amounting to $700,000. In March 2001, Enervations put 3M on notice of these alleged violations. After receiving notification on October 8, 2001, of a price-quota shortfall, Enervations requested adjustments on the quota on November 5, 2001, and December 13, 2001. Enervations alleges that 3M unreasonably withheld adjustment to the quotas which would make the subsequent termination of the Agreement "on January 1, 2002" improper and unlawful. Finally, Enervations contends that on March 23, 2002, 3M notified other distributors that Enervations' territory was no longer exclusive. Following this notice, 3M named a different authorized distributor for Enervations' exclusive territory. Based on these allegations, Enervations filed its Complaint in the United States District Court for the District of Minnesota on December 30, 2002, and later served the Summons and Complaint on 3M on March 17, 2003.
In its memorandum in opposition to 3M's motion to dismiss, Enervations attached a letter dated January 1, 2002, from 3M to Enervations entitled "Termination of January 1, 1999 Agreement; Transition Options" ("TT"). In this letter, 3M stated that it was officially giving notice of termination pursuant to section 9, subsection C of the Agreement, but extended an offer to begin a new course of dealing. Enervations also supplied a facsimile entitled "Memorandum of Understanding — Distributor Transition Agreement" ("MOU"), dated January 25, 2002. In this facsimile, 3M stated that it wished to permit Enervations to continue to function as a distributor for an interim period. At the same time, 3M reiterated that it had given notice of termination which was not to be prejudiced by the MOU.
Discussion
1. Standard of Review
In deciding a motion to dismiss, the Court must assume all facts in the Complaint to be true and construe all reasonable inferences from those facts in the light most favorable to the complainant. Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986). The Court grants a motion to dismiss only if it is clear beyond any doubt that no relief could be granted under any set of facts consistent with the allegations in the Complaint. Id. The Court may grant a motion to dismiss on the basis of a dispositive issue of law. Neitzke v. Williams, 490 U.S. 319, 326 (1989). The Court need not resolve all questions of law in a manner which favors the complainant; rather, the Court may dismiss a claim founded upon a legal theory which is "close but ultimately unavailing." Id. at 327. Also, where it appears from the fact of the complaint that the statute of limitations has run, an action is subject to dismissal under Federal Rules of Procedure 12(b)(6). Guy v. Swift and Co., 612 F.2d 383, 385 (8th Cir. 1980).
The Court may look beyond the pleadings, but must convert the motion to dismiss into a motion for summary judgment. Fed.R.Civ.P. 12(b); Carter v. Stanton, 405 U.S. 669, 671 (1972). If such a conversion occurs, summary judgment is proper if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The court must view the evidence and the inferences which may be reasonably drawn from the evidence in the light most favorable to the nonmoving party. Enterprise Bank v. Magna Bank of Missouri, 92 F.3d 743, 747 (8th Cir. 1996). However, as the Supreme Court has stated, "[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed 'to secure the just, speedy, and inexpensive determination of every action.'" Fed.R.Civ.P. 1; Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986).
The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Enterprise Bank, 92 F.3d at 747. The nonmoving party must demonstrate the existence of specific facts in the record which create a genuine issue for trial. Krenik v. County of Le Seur, 47 F.3d 953, 957 (8th Cir. 1995). A party opposing a properly supported motion for summary judgment may not rest upon mere allegations or denials, but must set forth specific facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Krenik, 47 F.3d at 957.
2. Statute of Limitations
As an initial matter, both parties agree that Minnesota law governs the dispute as stipulated in section 10, subsection C of the Agreement. The application of Minnesota law has two major effects on analyzing the statute of limitations issue underlying 3M's motion to dismiss. First, according to Minnesota Statutes § 336.2-725, the parties to a contract may agree to set the statute of limitations for a cause of action on a contract to no less than one year but no more than the four-year limit established by the statute. In this case, section 10, subsection D of the Agreement states that any action for breach under the Agreement "must be commenced within one (1) year after the later to occur of (i) the date on which the breach occurs, or (ii) the date on which the other party either obtains knowledge of or should have known of the breach." Thus, Enervations must commence any claim of breach within one year of its occurrence or reasonable awareness thereof.
Second, according to Minn. R. Civ. P. 3.01, an action is commenced upon service of the summons and the complaint on the defendant. Although commencement of an action is a procedural question, the United States Supreme Court has held that state law governs when a suit is commenced in a diversity action. Walker v. Armco Steel Corp., 446 U.S. 740, 751-53 (1980). Since all five counts are either contract or tort claims brought under state law, for purposes of the statute of limitations, the action was commenced when Enervations served 3M with the Summons and Complaint on March 17, 2003.
3. Breach of Contract of Unlawful Termination
3M asserts that Enervations specifically alleges that the breach of contract for unlawful termination occurred on January 1, 2002. 3M contends that because the Summons and Complaint were served on March 17, 2003, the cause of action for breach of contract for unlawful termination was commenced over two months after the one-year statute of limitations had run. Thus, 3M asserts that Count II of Enervations' Complaint is time-barred. The Court agrees.
In its response to 3M's motion to dismiss, Enervations attempts to assert that the cause of action for breach of contract for unlawful termination did not accrue until April 2002. According to this theory, Enervations and 3M continued their distributor-manufacturer relationship after January 1, 2002, and the parties were in negotiations after that time to modify the 1999 Agreement. In April 2002, however, 3M opened up Enervations' territory to other distributors. At that point in time, Enervations contends that it suffered damages, which had been the missing element for any possible breach of unlawful termination claim against 3M. Thus, Enervations asserts that the statute of limitations started to accrue for the breach of contract for unlawful termination of the Agreement at some point in April when Enervations suffered damage. The Court disagrees.
Enervations' latest tack, which is made to avoid the statute of limitations, is unavailing and flies in the fact of its pleadings. In its Complaint, Enervations specifically alleged that 3M allowed other distributors to sell an estimated $700,000 of 3M's product in Enervations' exclusive territory before January 1, 2002. Enervations' new damage date, April 2002, contradicts the Complaint and, therefore, cannot push the statute of limitations beyond January 1, 2002.
In making its decision, the Court did not consider Enervations' extra pleading materials; however, even if the Court were to consider these materials, the Court would still find in favor of 3M. In this motion, Enervations asserts that it was business as usual between Enervations and 3M until April of 2002. In support of this argument, Enervations provided the TT letter and the MOU, which spoke in terms of modifying and extending the 1999 Agreement. As pointed out in 3M's reply memorandum, this outside material does not support Enervations' position. Despite the offers for extension and modification of the relationship, both the TT letter and MOU are explicit that the Agreement had been terminated. No reasonable person could infer that the TT letter of January 1, 2002, and the MOU of January 25, 2002, did not put Enervations on notice of a possible breach for unlawful termination. Moreover, any attempt to create an issue of fact concerning the date of damage would run afoul of the same bar against contradicting the pleadings as exists in a motion to dismiss. Since Enervations' own Complaint and extra pleading materials solidify the date of occurrence and notice of breach before March 17, 2001, Enervations would not have survived a conversion to summary judgment.
4. Remaining Claims
3M also asserts that Counts I, III, IV, and V are time-barred. Enervations has made no attempt to address these counts in its response to 3M's motion to dismiss. In its Complaint, Enervations alleges wrongful indirect sales between 1999 and 2001. Enervations notified 3M in March 2001 of the alleged infringement of their exclusive territory. Then, in November and December 2001, Enervations requested adjustments on the price quotas because of these alleged wrongful indirect sales. Because the alleged misconduct for the direct and indirect sales of goods into the exclusive territory took place before March 17, 2002, Counts I, III, IV, and V are time-barred for the same reasons as set forth above.
For the reasons stated, IT IS HEREBY ORDERED:
1. Defendant's Motion to Dismiss (Doc. No. 3) is GRANTED; and
2. Plaintiff's Complaint (Doc. No. 1) is DISMISSED WITH PREJUDICE.