DIRECT ENTERPRISES, INC. et al v. SENSIENT COLORS LLC

Filing 256

ORDER - Plaintiffs Direct Enterprises, Inc. ("DEI") and Olympus Seed Treatment Formulator, Inc. ("Olympus") (collectively "Plaintiffs") are companies that specialize in blending and selling treatment mixtures for seeds . As is relevant here, Defendant and Third-Party Plaintiff Sensient Colors LLC ("Sensient") sells colorants that are used as additives in seed treatment blends, and Defendant and Third-Party Defendant Spectra Colorants, Inc. ("Spec tra") manufactures colorants. This matter arises primarily from a dispute among the parties regarding a batch of allegedly defective colorants manufactured by Spectra that Plaintiffs purchased from Sensient. Plaintiffs and Sensient have reach ed a settlement agreement, and the only issue remaining for the Court's resolution is Sensient's claim against Spectra for contractual duties of indemnification and defense. Sensient has moved for summary judgment on that claim, and for the reasons described in this Order, the Court denies that motion. The issue of defense indemnity is usually a matter of contract construction, proper for resolution on summary judgment. However the paucity of both evidence and developed argument in this case preclude resolution based on the instant motion. For the reasons described in this Order, the Court DENIES Sensient's Motion for Summary Judgment, 189 , as to its third-party claim against Spectra. The Court requests that the magistrate judge conduct a status conference to determine the most efficient course to bring the case to final resolution. (SEE ORDER). Signed by Judge Jane Magnus-Stinson on 1/24/2018. (APD)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
DIRECT ENTERPRISES, INC.,
OLYMPUS SEED TREATMENT
FORMULATOR, INC.,

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)
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Plaintiffs,
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)
v.
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SENSIENT COLORS LLC,
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)
Defendant.
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)
SENSIENT COLORS LLC,
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)
Third Party Plaintiff, )
)
v.
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SPECTRA COLORANTS, INC.,
)
)
Third Party Defendant. )

No. 1:15-cv-01333-JMS-TAB

ORDER
Plaintiffs Direct Enterprises, Inc. (“DEI”) and Olympus Seed Treatment Formulator, Inc.
(“Olympus”) (collectively “Plaintiffs”) are companies that specialize in blending and selling
treatment mixtures for seeds. As is relevant here, Defendant and Third-Party Plaintiff Sensient
Colors LLC (“Sensient”) sells colorants that are used as additives in seed treatment blends, and
Defendant and Third-Party Defendant Spectra Colorants, Inc. (“Spectra”) manufactures colorants.
This matter arises primarily from a dispute among the parties regarding a batch of allegedly
defective colorants manufactured by Spectra that Plaintiffs purchased from Sensient. Plaintiffs
and Sensient have reached a settlement agreement, and the only issue remaining for the Court’s
resolution is Sensient’s claim against Spectra for contractual duties of indemnification and defense.
1

Sensient has moved for summary judgment on that claim, and for the reasons described below, the
Court denies that motion.
I.
BACKGROUND
Plaintiffs market and distribute farming inputs and agricultural products, including seed
treatments such as fungicides and pesticides. [Filing No. 189-1 at 3-4.] By federal regulation,
seeds that are treated with compounds that are poisonous to humans and animals must be colored,
so that persons handling the seeds are aware of their potential toxicity. [Filing No. 189-1 at 5.]
Several of Plaintiffs’ seed treatments contain compounds that have a degree of toxicity to humans
and animals, and in 2012, Plaintiffs sought to purchase colorants to add to their treatment blends.
[Filing No. 189-1 at 6-7.]
Defendant Sensient is a supplier of colorants, which it promotes for use in food, cosmetic,
and industrial applications. [Filing No. 189-4 at 3.] Plaintiffs made their first purchase of colorants
from Sensient in May 2012, followed by more purchases in subsequent months. [See, e.g., Filing
No. 95-3; Filing No. 95-6; Filing No. 95-7; Filing No. 95-8; Filing No. 189-6.] Plaintiffs mixed
those colorants into their seed treatments to create the final blends sold to customers. [Filing No.
189-1 at 3.] The colorants that Plaintiffs purchased from Sensient were manufactured by Spectra. 1
[Filing No. 190 at 12.]

1

Plaintiffs allege in their Third Amended Complaint that Sensient misrepresented itself as the
manufacturer of the colorants, when in fact Spectra was the manufacturer. [Filing No. 95 at 15.]
Sensient does not directly address this allegation in its statement of material facts not in dispute,
[Filing No. 190], and the Court notes it here by way of background.
2

Beginning in the spring of 2013, Plaintiffs received complaints from customers that their
seed treatments had “hardened” and become unusable. 2 [Filing No. 189-1 at 25-26.] After
investigating those complaints, Plaintiffs became convinced that Sensient’s colorants were the
source of the problem, and they notified Sensient of the issue. [Filing No. 189-1 at 25-26.]
Sensient claims that after learning of the complaints from Plaintiffs, it investigated by speaking to
Spectra. 3 [Filing No. 190 at 12 (citing Filing No. 189-14 at 16).] After conducting its own
examination, Spectra discovered that some of the red colorants it sold to Sensient “had a greater
level of ammonia than originally contemplated.” [Filing No. 195 at 2; Filing No. 189-14 at 15.]
As a result of the customer complaints, Plaintiffs provided credits and/or replacements to some of
their customers. [Filing No. 189-1 at 28-29.]
Plaintiffs filed suit in this Court against Sensient, raising six claims: (1) fraud and
constructive fraud; (2) breach of contract; (3) breach of express warranty; (4) breach of the implied
warranty of merchantability; (5) breach of the implied warranty of fitness for a particular purpose;
and (6) violation of the Indiana Products Liability Act (“IPLA”). [Filing No. 95.] Sensient then
filed a third-party complaint against Spectra, alleging that Spectra owes Sensient a duty to defend
and a duty to indemnify Sensient against Plaintiffs’ claims. [Filing No. 44 at 12-13.]
Sensient moved for summary judgment both on Plaintiffs’ claims against it and on its
claims against Spectra, [Filing No. 189], which Plaintiffs and Spectra opposed, [Filing No. 195;
Filing No. 197]. After the parties’ summary judgment briefing was complete, Plaintiffs and
Sensient reached a settlement on Plaintiffs’ claims, and the parties have filed a stipulation of

2

Plaintiffs allege that Sensient did not inform them that Spectra was the manufacturer until April
2014, approximately one year after the onset of consumer complaints. [Filing No. 95 at 13.]
3

Spectra appears not to dispute this fact, stating that its former general manager “analyzed the
issues Plaintiffs identified with their seed treatments.” [Filing No. 195 at 2.]
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dismissal as to those claims. [Filing No. 253; Filing No. 254.] Accordingly, the only issue
remaining for resolution on summary judgment is whether Spectra is required to defend and
indemnify Sensient. [Filing No. 253.] That issue is now ripe for the Court’s review.
II.
LEGAL STANDARD
A motion for summary judgment asks the Court to find that a trial is unnecessary because
there is no genuine dispute as to any material fact and, instead, the movant is entitled to judgment
as a matter of law. See Fed. R. Civ. P. 56(a). As the current version of Rule 56 makes clear,
whether a party asserts that a fact is undisputed or genuinely disputed, the party must support the
asserted fact by citing to particular parts of the record, including depositions, documents, or
affidavits. Fed. R. Civ. P. 56(c)(1)(A). A party can also support a fact by showing that the
materials cited do not establish the absence or presence of a genuine dispute or that the adverse
party cannot produce admissible evidence to support the fact. Fed. R. Civ. P. 56(c)(1)(B).
Affidavits or declarations must be made on personal knowledge, set out facts that would be
admissible in evidence, and show that the affiant is competent to testify on matters stated. Fed. R.
Civ. P. 56(c)(4). Failure to properly support a fact in opposition to a movant’s factual assertion
can result in the movant’s fact being considered undisputed, and potentially in the grant of
summary judgment. Fed. R. Civ. P. 56(e).
In deciding a motion for summary judgment, the Court need only consider disputed facts
that are material to the decision. A disputed fact is material if it might affect the outcome of the
suit under the governing law. Hampton v. Ford Motor Co., 561 F.3d 709, 713 (7th Cir. 2009). In
other words, while there may be facts that are in dispute, summary judgment is appropriate if those
facts are not outcome determinative. Harper v. Vigilant Ins. Co., 433 F.3d 521, 525 (7th Cir.

4

2005). Fact disputes that are irrelevant to the legal question will not be considered. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
On summary judgment, a party must show the Court what evidence it has that would
convince a trier of fact to accept its version of the events. Johnson v. Cambridge Indus., 325 F.3d
892, 901 (7th Cir. 2003). The moving party is entitled to summary judgment if no reasonable factfinder could return a verdict for the non-moving party. Nelson v. Miller, 570 F.3d 868, 875 (7th
Cir. 2009). The Court views the record in the light most favorable to the non-moving party and
draws all reasonable inferences in that party’s favor. Darst v. Interstate Brands Corp., 512 F.3d
903, 907 (7th Cir. 2008). It cannot weigh evidence or make credibility determinations on summary
judgment because those tasks are left to the fact-finder. O’Leary v. Accretive Health, Inc., 657
F.3d 625, 630 (7th Cir. 2011). The Court need only consider the cited materials, Fed. R. Civ. P.
56(c)(3), and the Seventh Circuit Court of Appeals has “repeatedly assured the district courts that
they are not required to scour every inch of the record for evidence that is potentially relevant to
the summary judgment motion before them,” Johnson, 325 F.3d at 898. Any doubt as to the
existence of a genuine issue for trial is resolved against the moving party. Ponsetti v. GE Pension
Plan, 614 F.3d 684, 691 (7th Cir. 2010).
III.
DISCUSSION
Sensient argues that it is entitled to summary judgment on its third-party complaint against
Spectra, contending that as a matter of law, Spectra is required to defend and indemnify it. [Filing
No. 190 at 33.] Sensient relies on a provision that appears in the “Terms and Conditions that
governed [Sensient’s] purchase of the pearlescent colorants from Spectra,” contending that the
provision establishes an absolute duty to defend and indemnify. [Filing No. 190 at 34.] Sensient
argues that “the undisputed facts are that Spectra manufactured a defective batch of pearlescent
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colorants with too much ammonia, and Olympus alleged in good faith it had incurred damages
caused by the ammonia defect. On these facts alone, Spectra should be ordered to defend and
indemnify Sensient.” [Filing No. 190 at 35.]
Spectra disputes Sensient’s allegation that Spectra manufactured a batch of colorants with
“too much ammonia.” [Filing No. 195 at 2-3.] But even if excess ammonia were involved, Spectra
argues, Plaintiffs’ claims actually arise out of Sensient’s own acts or omissions, and not out of any
product defect. [Filing No. 195 at 5.] Spectra argues that is not required to defend or indemnify
Sensient for its own independent misrepresentations, concealment, or contractual breaches
involving Plaintiffs. [Filing No. 195 at 6.] In reply, Sensient argues that Plaintiffs’ claims all arise
out of the allegedly defective product, and therefore fall within the language of the indemnity
provision. [Filing No. 208 at 21.]
Despite moving for summary judgment on an issue of contract interpretation, Sensient
neither cites to nor attaches a copy of that contract to its motion or briefing. Instead, it cites only
to the indemnification and defense provision it contends is at issue, as referenced in Spectra’s
responses to Sensient’s first set of interrogatories and request for admission. 4 [Filing No. 208 at
19 (citing Filing No. 189-15 at 3).] Missouri law 5 is clear that in interpreting a contract, the court
reviews “the terms of the contract as a whole, not in isolation,” Tuttle v. Muenks, 21 S.W.3d 6, 1112 (Mo. Ct. App. 2000), and that “each clause must be read in the context of the entire contract,”

4

Of course, it is possible that a copy of the relevant document has been submitted elsewhere in
the voluminous filings in this matter. However, as this Court and the Seventh Circuit have
repeatedly cautioned litigants, district courts are not required to scour the record searching for
evidence in support of a claim. See, e.g., Flaherty v. Gas Research Inst., 31 F.3d 451, 453 (7th
Cir. 1994).
5

The parties agree that Missouri law applies to the purported agreement under which Sensient
seeks contractual indemnification and defense. [Filing No. 195 at 4; Filing No. 208 at 19.]
6

State ex rel. Pinkerton v. Fahnestock, 531 S.W.3d 36, 44 (Mo. 2017). See also Alternative Med.
& Pharmacy, Inc. v. Express Scripts, Inc., 2016 WL 468647, at *4 (E.D. Mo. Feb. 8,
2016), reconsideration denied, 2016 WL 827934 (E.D. Mo. Mar. 3, 2016) (“In construing a
contract, a court must give all contract terms their plain and ordinary meaning and consider the
whole document. … Courts must not interpret contract provisions in isolation but rather evaluate
the contract language as a whole.”) (citing Gavan v. Bituminous Cas. Corp., 242 S.W.3d 718, 720
(Mo. 2008); Jackson County v. McClain Enters., 190 S.W.3d 633, 640 (Mo. Ct. App. 2006);
Ritchie v. Allied Prop. & Cas. Ins. Co., 307 S.W.3d 132, 135 (Mo. 2009)).
This omission leaves the Court unable to determine, based on admissible evidence, whether
there was a valid and enforceable contract between Sensient and Spectra at all. But even assuming
there were a valid contract, the Court cannot determine its parameters, including the meaning of
the cited contractual term, without being able to review the contract itself. In addition to the issue
of the relationship of that particular provision to other provisions and the contract as a whole, there
are a variety of other inquiries that would inform the Court’s analysis. For example, Spectra
alleges that the provision appears on a form purchase order. [Filing No. 189-15 at 3.] Under
Missouri law, the placement details of an indemnification provision on a form contract can be
important factors in the determining enforceability and interpretation of that provision. See, e.g.,
Burcham v. Procter & Gamble Mfg. Co., 812 F. Supp. 947, 948 (E.D. Mo. 1993) (concluding that
“[u]pon review of the contract…the Court concludes that the indemnity provision at issue here is
not sufficiently conspicuous to warrant its enforcement. The provision appears in small print on
the back of a boiler plate purchase order form supplied to Bazan by P & G. It is surrounded by
unrelated terms and is not highlighted, printed in bold type or otherwise set apart from the other
provisions in the contract in order that a contractor such as Bazan would note its inclusion in the

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contract. Where a provision appears on the back of a printed form surrounded by unrelated terms,
it is not conspicuous and may not be enforced.”) (citation omitted). The Court, therefore, must
deny Sensient’s Motion for Summary Judgment.
The Court notes, however, that even if the Court conducted the analysis argued by
Sensient—interpreting the single contractual provision in isolation from the rest of the contract—
the Court could not conclude that the provision provides the wide-ranging coverage asserted by
Sensient. The provision reads as follows:
Seller shall defend and save buyer harmless against all damages, liabilities, claims,
losses, costs, expenses, penalties, or fines, including reasonable attorney fees,
arising out of or resulting in any way from any actual or alleged defect in the goods
or services purchased hereunder or from any act or omissions of seller, its agents,
employees, or subcontractors with respect to such goods or services. Seller agrees
to reimburse buyers for any losses or expenses incurred or suffered by buyer,
including reasonable attorneys’ fees, for seller’s failure to timely perform any of its
obligations hereunder.
[Filing No. 189-15 at 3.] While Sensient argues that this language requires Spectra to indemnify
and defend it against all of Plaintiffs’ claims, the Court need only discuss one example to
demonstrate why Sensient is not entitled to summary judgment on the scope of the subject
provision.
Among the six counts Plaintiffs allege against Sensient is a claim for fraud, including fraud
in the inducement. In that claim, Plaintiffs allege that Sensient made material misrepresentations
of past and existing fact, including that Sensient (not Spectra) was the manufacturer of the
colorants, in order to induce Plaintiffs to contract with Sensient. [Filing No. 95 at 15.] “Fraudulent
inducement occurs when a party is induced through fraudulent misrepresentations to enter into a
contract.” Lightning Litho, Inc. v. Danka Indus., Inc., 776 N.E.2d 1238, 1241 (Ind. Ct. App.

8

2002). 6

A claim for fraud consists of five elements: (1) the defendant made at least one

representation of a past or existing fact; (2) the representation was false; (3) the representation was
made with knowledge of its falsity or reckless ignorance of its falsity; (4) the plaintiff reasonably
relied on the representation; and (5) the representation caused harm to the plaintiff—in the case of
inducement,

the

harm

being

the

inducement

to

contract.

See

Scott v. Bodor, 571 N.E.2d 313, 320 (Ind. Ct. App. 1991); see also 7E Fit Spa Licensing Grp. LLC
v. Dier, 2016 WL 4943824, at *7 (S.D. Ind. Sept. 16, 2016).
This claim does not depend on the existence of a defect or an alleged defect in the goods
sold by Spectra: it involves only the contractual relationship between Plaintiffs and Sensient, and
whether Plaintiffs were fraudulently induced to enter into that relationship. The indemnification,
however, by its own terms, applies only to damages, losses, etc. “arising out of or resulting in any
way from any actual or alleged defect in the goods or services purchased hereunder.” [Filing No.
189-15 at 3.] Therefore, at a minimum, the language of the indemnification provision (considered
in isolation) cannot be read to require the defense or indemnification of Plaintiffs’ fraud in the
inducement claim. 7
IV.
CONCLUSION
The issue of defense indemnity is usually a matter of contract construction, proper for
resolution on summary judgment. However the paucity of both evidence and developed argument
in this case preclude resolution based on the instant motion. For the reasons described above, the

6

The parties appear to agree that Indiana law applies to Plaintiffs’ claims. [See Filing No. 190.]

7

The Court need not conduct this analysis regarding each of Plaintiffs’ claims. The Court cites
this example simply to illustrate that even if the Court could review the provision in isolation,
which it cannot, summary judgment would be inappropriate.
9

Court DENIES Sensient’s Motion for Summary Judgment, [189], as to its third-party claim against
Spectra. The Court requests that the magistrate judge conduct a status conference to determine the
most efficient course to bring the case to final resolution.

Date: 1/23/2018

Distribution:
Joel E. Cape
CAPE LAW FIRM PLC
[e-mail]
Kathleen Ann DeLaney
DELANEY & DELANEY LLC
[e-mail]
Kori Flake
KOPKA PINKUS DOLIN PC
[e-mail]
Jason Levin
STEPTOE & JOHNSON LLP
[e-mail]
Kelly D.H. Lowry
THE LAW OFFICES OF KELLY D.H. LOWRY, P.C.
[e-mail]
Eric C. McNamar
LEWIS WAGNER LLP
[e-mail]
10

Travis W. Montgomery
PARR RICHEY OBREMSKEY FRANDSEN & PATTERSON LLP
[e-mail]
Leslie B. Pollie
KOPKA PINKUS DOLIN PC
[e-mail]
Christopher S. Stake
DELANEY & DELANEY LLC
[e-mail]
Libretta P. Stennes
STEPTOE & JOHNSON LLP
[e-mail]
John Carl Trimble
LEWIS WAGNER LLP
[e-mail]
Paul Younger
THE LAW OFFICES OF PAUL YOUNGER, PLLC
[e-mail]

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