Whitlock Packaging Corporation v. Stearns et al

Filing 165

ORDER; Defendants Brian Stearns and Fuzzee Bee Beverages, LLC's Motion for Summary Judgment and Incorporated Brief in Support 87 is DENIED, by Magistrate Judge Kathleen M. Tafoya on 4/8/15.(morti, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Magistrate Judge Kathleen M. Tafoya
Civil Action No. 13–cv–02453–KMT

WHITLOCK PACKAGING CORPORATION,
Plaintiff,
v.
BRIAN STEARNS, and
FUZZEEBEE BEVERAGE, LLC,
Defendants.

ORDER

This matter is before the court on “Defendants Brian Stearns and Fuzzee Bee Beverages,
LLC’s Motion for Summary Judgment and Incorporated Brief in Support” (Doc. No. 87 [Mot.],
filed November 7, 2014). Plaintiff filed its response on November 26, 2014 (Doc. No. 93
[Resp.]), and Defendants filed their reply on December 10, 2015 (Doc. No. 100 [Reply]). This
motion is ripe for ruling.
STATEMENT OF THE CASE
Plaintiff alleges that Defendant Fuzeebee Beverage, LLC, has committed a breach of
contract by failing to pay Plaintiff all amounts due and owing under an Amended Contract
Manufacturing and Packaging Agreement (“CMPA”) for Plaintiff’s production of the energy
drink Zun. (See Doc. No. 43 [Am. Compl.].)

LEGAL STANDARD
Summary judgment is appropriate if “the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). The moving party bears the initial burden of showing an absence of evidence to support
the nonmoving party=s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). “Once the
moving party meets this burden, the burden shifts to the nonmoving party to demonstrate a
genuine issue for trial on a material matter.” Concrete Works, Inc. v. City & Cnty. of Denver, 36
F.3d 1513, 1518 (10th Cir. 1994) (citing Celotex, 477 U.S. at 325). The nonmoving party may
not rest solely on the allegations in the pleadings, but must instead designate “specific facts
showing that there is a genuine issue for trial.” Celotex, 477 U.S. at 324; see also Fed. R. Civ. P.
56(c). A disputed fact is “material” if “under the substantive law it is essential to the proper
disposition of the claim.” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998)
(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A dispute is “genuine” if the
evidence is such that it might lead a reasonable jury to return a verdict for the nonmoving party.
Thomas v. Metropolitan Life Ins. Co., 631 F.3d 1153, 1160 (10th Cir. 2011) (citing Anderson,
477 U.S. at 248).
When ruling on a motion for summary judgment, a court may consider only admissible
evidence. See Johnson v. Weld County, Colo., 594 F.3d 1202, 1209-10 (10th Cir. 2010). The
factual record and reasonable inferences therefrom are viewed in the light most favorable to the
party opposing summary judgment.

Concrete Works, 36 F.3d at 1517.

At the summary

judgment stage of litigation, a plaintiff’s version of the facts must find support in the record.
Thomson v. Salt Lake Cnty., 584 F.3d 1304, 1312 (10th Cir. 2009). “When opposing parties tell

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two different stories, one of which is blatantly contradicted by the record, so that no reasonable
jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a
motion for summary judgment.” Scott v. Harris, 550 U.S. 372, 380 (2007); Thomson, 584 F.3d
at 1312.
ANALYSIS
1.

Breach of Contract Claim
Defendants assert they are entitled to summary judgment on Plaintiff’s First Claim for

Relief for Breach of Contract. In its Amended Complaint, Plaintiff alleges Defendant Fuzzee
Bee breached the CMPA with Plaintiff “by failing to pay for manufacture and packaging
services” provided by Plaintiff. (Compl., ¶ 19.)
In their motion, Defendants argue that, under the terms of the contract, Plaintiff had a
duty to perform before Defendant Fuzzee Bee’s duty to pay was triggered. Defendants rely on
Section 4 of the CMPA, which states as follows:
4.

PRICES; INVOICING OF PRODUCT AND PAYMENTS:

On a periodic basis during the Term, Customer shall deliver to WPC
purchase orders incorporating the terms and conditions set forth herein and setting
forth the applicable volumes of products, delivery dates and delivery locations.
WPC shall timely and promptly deliver the products as specified in such orders.
WPC will generate an invoice for all goods shipped for or to Customer at the rates
outlined in Exhibit ‘A’ plus freight. Such invoices will be due Net 45-days from
date of issuance.
(Mot., Ex. 6 at 5, ¶ 4 [emphasis in original].) Defendant Fezzee Bee contends that Plaintiff failed
to manufacture and package Zun without substantial delay and defects, and maintained the
responsibility for the poor materials and packaging from third parties; failed to produce Zun to
specifications and in a timely manner; failed to prepare quality control records, monthly cost

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advance limits or maintain contractual liability insurance; and failed to take the necessary steps
to remedy the problems of which Plaintiff was aware. (Mot. at 15.)
A federal court sitting in diversity jurisdiction generally applies the substantive law of the
forum state, which in this case is Colorado. Herrera v. Lufkin Ind., Inc., 474 F.3d 675, 683 (10th
Cir. 2007). For contract claims, Colorado courts apply the law chosen by the parties “unless
there is no reasonable basis for their choice or unless applying the law of the state so chosen
would be contrary to the fundamental policy of a state whose law would otherwise govern.”
Hansen v. GAB Bus. Servs., Inc., 876 P.2d 112, 113 (Colo. App. 1994) (citing Restatement
(Second) of Conflict of Laws § 187 (1971)). The parties do not dispute that Section 18.2 of the
CMPA provides the contract is to be “governed by, construed and enforced in accordance with
the laws of the State of Oklahoma.” (Mot., Ex. 6 at 12, ¶ 18.) Moreover, there was a reasonable
basis for selecting Oklahoma law, because Plaintiff is an Oklahoma corporation. Accordingly,
the court will apply Oklahoma law to the breach of contract claim.
“ ‘A condition precedent of a contract is one which calls for the performance of some act
or the happening of some event after the contract is entered into and upon the performance or
happening of which its obligations are made to depend.” ’ See Woods v. City of Lawton, 845
P.2d 880, 886 n.6 (Okla. 1992) (quoting Rollins v. Rayhill, 191 P.2d 934, 937 (Okla. 1948)). “A
condition precedent is a condition that must be met before the obligation under a contract
becomes due.” Id. (citing 3A Corbin on Contracts, § 628 (1960)). Under Oklahoma law, courts
“are disinclined to construe contract provisions as conditions precedent unless compelled by the
plain language of the contract.” M.J. Lee Const. Co. v. Oklahoma Transp. Auth., 125 P.3d 1205,
1215 (Okla. 2005).

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The Tenth Circuit has stated, in considering whether a contract contains a condition
precedent or mutual promises:
Courts are disinclined to construe the stipulations of a contract as conditions
precedent, unless compelled by the language of the contract plainly expressed.
The reason of this disinclination is that such a construction prevents the court
from dealing out justice to the parties according to the equities of the case.
Williston on Contracts, § 671.
Because the enforcement of conditions frequently leads to forfeitures and
penalties courts have always been indisposed to construe contracts as conditional,
unless the language is too clear to be mistaken; and have frequently disregarded
plainly expressed conditions, because of their unwillingness to deprive a promisee
of all rights on account of some trivial breach of condition. Williston on
Contracts, § 827.
Southern Surety Co. v. MacMillan Co., 58 F.2d 541, 548 (10th Cir. 1932). The question before
the Tenth Circuit in MacMillan was whether a provision in a bond, requiring that the surety be
given notice of default by the principal, constituted a condition precedent or a promise. In
determining that the provision was a promise and not a condition precedent, the Court noted, in
examining the language of the bond, that
. . . the first thing noticed is that it contains ‘no express provision in the bond
declaring that it shall be void if the notice of prior misconduct is not given.’ . . .
The next point is that the language used is that generally used in a promise,
‘notice shall be mailed,’ and not that generally used in a condition, ‘if notice is (or
shall be) mailed.’
MacMillan, 58 F.2d at 546. “ ‘[W]hen the act of one is not necessary to the act of the other,
though it would be convenient, useful, or beneficial, yet as the want of it does not prevent
performance, and the loss and inconvenience can be compensated in damages, performance of
the one is not a condition precedent to performance by the other.’ ” 58 F.2d at 547 (quoting New
Orleans v. Texas & Pac. Ry., 171 U. S. 312, 334 (1898)). “Breach of promise subjects the
promisor to liability in damages, but does not necessarily excuse performance on the other side.
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Breach of condition prevents the party failing to perform from acquiring a right, or deprives him
of one, but subjects him to no liability.” Id. at 551.
The court agrees with the plaintiff that the words used in Section 4 of the CMPA—
“Customer shall deliver to WPC, . . .”; “WPC shall timely . . .”; and “WPC will generate . . . .”
—are words of promise and not a condition precedent. Moreover, there is no express provision
voiding the CMPA or the defendants’ obligations under the contract in the event Plaintiff failed
“to timely and promptly deliver the products as specified in such orders” (see Mot.,. Ex. 6 at 5, ¶
4). MacMillan, 58 F.2d at 546. Rather, under the terms of the CMPA, Plaintiff’s alleged breach
of its promises may subject it to liability in damages, but does not necessarily excuse
Defendants’ performance. 58 F.2d at 551.
Accordingly, Defendants’ motion for summary judgment on Plaintiff’s breach of contract
claim is denied.1
2.

Oppressive Conduct Claim
Defendants also move for summary judgment on Plaintiff’s Second Claim for Relief for

Direct Action–Oppressive Conduct. (Mot. at 19-23.) However, Plaintiff has represented to the
court that it intends to withdraw that claim, and Plaintiff has omitted that claim from the

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Defendants interpret Plaintiff’s First Claim for Relief for Breach of Contract as also asserting a
claim for breach of fiduciary duty against Defendant Stearns in his role as manager of the LLC
and move for summary judgment on that claim. (Mot. at 13, 15-19.) Plaintiff, in its response,
does not address this argument. (See Resp.) Nevertheless, it is clear from the proposed amended
Final Pretrial Order that Plaintiff does not assert such a claim. (See Doc. No. 163 at 2, § 3
[“Whitlock claims that FBB has committed a breach of contract by failing to pay WPC all
amounts due and owing under an Amended Contract Manufacturing and Packaging Agreement
for WPC’s production of the energy drink Zun.”].) As such, the court does not construe Plaintiff
First Claim as asserting a claim for breach of fiduciary duty and does not address Defendants’
argument in that regard. Moreover, based on its representations in the Final Pretrial Order,
Plaintiff is precluded from asserting such a claim.
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proposed amended Final Pretrial Order.2 (See Doc. No. 163 at 2, § 3.) Therefore, Defendants’
motion for summary judgment in this regard is denied as moot.
WHEREFORE, for the going reasons, it is
ORDERED that “Defendants Brian Stearns and Fuzzee Bee Beverages, LLC’s Motion
for Summary Judgment and Incorporated Brief in Support” (Doc. No. 87 ) is DENIED.
Dated this 8th day of April, 2015.

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The court has ordered Plaintiff, no later than April 10, 2015, to file an appropriate stipulation to
dismiss the claim under Fed. R. Civ. P. 41(a)(1)(A)(ii) or a motion to dismiss the claim under
Fed. R. Civ. P. 41(a)(2). (Doc. No. 164.)
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