Denson International Limited v. Liberty Diversified International, Inc.
ORDER granting in part consistent with the order 49 Motion for Summary Judgment (Written Opinion). Signed by Senior Judge David S. Doty on 7/9/2014. (PJM)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 12-3109(DSD/JSM)
Denson International Limited,
Liberty Diversified International,
Inc., doing business as Safco
Tiffany A. Blofield, Esq. and Winthrop & Weinstine, PA,
225 South Sixth Street, Suite 3500, Minneapolis, MN
55402, counsel for plaintiff.
Meghan E. Lind, Esq. and Dorsey & Whitney LLP, 50 South
Sixth Street, Suite 1500, Minneapolis, MN 55402, counsel
This matter is before the court upon the motion for summary
judgment by counterclaim defendant Denson International Limited
Based on a review of the file, record and proceedings
herein, and for the following reasons, the court grants the motion
relationship between Denson and counterclaim plaintiff Liberty
Diversified International, Inc., doing business as Safco Products
company, which designed and sold metal hand trucks.
Denson coordinated with several factories in China to
manufacture and ship Valley Craft hand trucks.
Id. ¶ 3.
In December 2004, the United States Department of Commerce
issued an antidumping duty order on “Hand Trucks and Certain Parts
Thereof from the People’s Republic of China.”
Lind Decl. Ex. 1,
ECF No. 64. Thereafter, Denson employee Vincent To informed Valley
Craft of the order, which assigned an antidumping duty rate of
383.6 percent on imports of hand trucks from China. See Countercl.
In response, Valley Craft contacted Denson to cancel its
pending orders of hand trucks.
Blofield Decl. Ex. A, ECF No. 55.
Denson informed Valley Craft, however, that it had a different
supplier, nonparty Qingdao Taifa Group Co. (Taifa), which was
production be moved to the Taifa factory.
ECF No. 55.
Blofield Decl. Ex. G,
Valley Craft agreed, and Denson thereafter informed
LDI that it had moved production to the Taifa facility.
Ex. 2, ECF No. 64.
Denson continued to supply hand trucks to Valley Craft.
invoices for such transactions stated that the hand trucks were
“produced by Qingdao Taifa Group Imp[.] & Exp. Co., Ltd. with the
Anti-Dumping Case Number A560891-004.”
Wong Decl. Ex. 1, at
Valley Craft paid the lower antidumping rate of
26.49 percent for such shipments.
Countercl. ¶ 12.
In July 2007,
after an inquiry from a Valley Craft employee, Denson confirmed
that “[a]ll of the hand truck products that [Denson had] shipped to
[Valley Craft] were produced by” Taifa.
Lind Decl. Ex. 5, ECF No.
In February 2008, a shipment of hand trucks was rejected by
the United States Customs and Border Protection (Customs) because
the invoice did not note the existence of the lower antidumping
See Blofield Decl. Ex. H, ECF No. 55.
contacted Denson, and Denson stated that it believed there was no
need to include a statement identifying the manufacturer.
April 1, 2008, Denson informed Valley Craft that a sister company
of Taifa was the actual manufacturer of the hand trucks.
Decl. Ex. 6, ECF No. 64.
That same day, LDI requested that Denson
include language on the invoices noting that such shipments were
“exempt from the anti-dumping duty.” Blofield Decl. Ex. M, ECF No.
Thereafter, Customs rejected another shipment of hand trucks
and asked Valley Craft to explain why the shipment was not subject
to antidumping duties.
Blofield Decl. Ex. C, ECF No. 55, at
LDI00000259. Valley Craft again contacted Denson, and was informed
that Yangjiang Shunhe Industrial Co. Ltd (Yangjiang) had produced
the hand trucks.
Lind Decl. Ex. 7, ECF No. 64.
Yangjiang was not
exempt from the higher antidumping rate.
Id. Ex. 1, at 2.
sent its last shipment of hand trucks to Valley Craft on October
Wong Decl. Ex. 3, at DENSON007745.
In February 2009, Customs informed LDI that it was under
investigation for failing to pay antidumping duties.
Ex. 8, ECF No. 64, at LDI00000246.
Bayer Decl. ¶ 4.
LDI initiated an internal
As part of the investigation, LDI
asked Denson for purchase orders or invoices from Taifa.
informed LDI that it could not provide the orders or invoices. See
Lind Decl. Ex. 11, ECF No. 64.
produced by the Taifa factory.
Ultimately, LDI was unable to
Bayer Decl. ¶ 5.
findings to Customs in October 2009.
LDI reported its
See Lind Decl. Ex. 8, ECF No.
Thereafter, LDI1 paid $709,360.21 in antidumping duties to
Id. Exs. 8, 12.
Customs also assessed LDI a penalty of
$1,252,045 for its noncompliance.
Id. Ex. 13, at LDI00002919.
On December 13, 2012, Denson filed a complaint, alleging
misappropriation of trade secrets.
On January 29, 2013, LDI filed
a counterclaim, alleging fraudulent misrepresentation, fraudulent
omission and breach of contract. Denson moves for summary judgment
on the counterclaim.
LDI sold Valley Craft in 2012, but retained liability
related to the Customs investigation. Bayer Decl. ¶ 7.
Standard of Review
“The court shall grant summary judgment 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); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
A fact is material only when its resolution affects the outcome of
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
A dispute is genuine if the evidence is such that it could
cause a reasonable jury to return a verdict for either party.
id. at 252.
On a motion for summary judgment, the court views all evidence
and inferences in a light most favorable to the nonmoving party.
See id. at 255.
The nonmoving party, however, may not rest upon
mere denials or allegations in the pleadings but must set forth
specific facts sufficient to raise a genuine issue for trial.
Celotex, 477 U.S. at 324.
A party asserting that a genuine dispute
exists — or cannot exist — about a material fact must cite
“particular parts of materials in the record.”
Fed. R. Civ. P.
If a plaintiff cannot support each essential element
of a claim, the court must grant summary judgment because a
necessarily renders all other facts immaterial.
Celotex, 477 U.S.
LDI first alleges a claim for fraudulent misrepresentation.
Specifically, LDI alleges that Denson misrepresented that Taifa was
the manufacturer of the hand trucks.
Under Minnesota law, to
(1) there was a false representation by a
party of a past or existing material fact
susceptible of knowledge; (2) made with
knowledge of the falsity of the representation
or made as of the party's own knowledge
without knowing whether it was true or false;
(3) with the intention to induce another to
act in reliance thereon; (4) that the
representation caused the other party to act
in reliance thereon; and (5) that the party
suffer[ed] pecuniary damage as a result of the
Hoyt Props., Inc. v. Prod. Res. Grp., L.L.C., 736 N.W.2d 313, 318
(Minn. 2007) (alteration in original) (citation omitted).
(2) because LDI was aware that the hand trucks were not produced by
Taifa, it did not detrimentally rely on any contrary statements
made by Denson.
Denson first argues that summary judgment on the fraudulent
See Fed. R. Civ. P. 9(b).
The court “may enter
summary judgment dismissing a complaint alleging fraud if the
complaint fails to satisfy the requirements of Rule 9(b).”
Plumbing, Inc. v. Scherer Bros. Fin. Servs. Co., 48 F.3d 1066, 1070
(8th Cir. 1995) (citation omitted).
To satisfy the heightened
pleading requirement, a plaintiff must set forth the “who, what,
where, when, and how” of an alleged fraud.
United States ex rel.
Joshi v. St. Luke's Hosp., Inc., 441 F.3d 552, 556 (8th Cir. 2006)
In other words, a plaintiff must plead “the
identity of the individual who made the representations and what
was obtained thereby.
BJC Health Sys. v. Columbia Cas. Co., 478
F.3d 908, 917 (8th Cir. 2007) (citations and internal quotation
Denson argues that LDI has not identified the allegedlyfraudulent statements at issue.
LDI, however, has adduced, among
other documents, (1) an email from Denson employee Edward Kong
stating that “[a]ll of the hand truck products that [Denson had]
shipped to [LDI] were produced by [Taifa],” Lind Decl. Ex. 5, ECF
No. 64, and (2) invoices from Denson stating that the hand trucks
were produced by Taifa, Wong Decl. Ex. 1.
Thus, LDI has adequately
fraudulent representations by Denson.
As a result, Denson’s
argument that summary judgment is warranted based on insufficient
pleading is unavailing.
misrepresentation fails because LDI could not have detrimentally
relied on the statements at issue.
Specifically, Denson argues
that LDI was aware, prior to the Customs investigation, that the
hand trucks at issue were not manufactured by Taifa.
Denson’s employee, Vincent To, informed LDI on April 1, 2008, that
the hand trucks were not produced by Taifa.
ECF No. 64.
See Lind Decl. Ex. 6,
Thereafter, LDI requested that Denson ship the hand
carts with an invoice including the statement “that the carts are
exempt from the anti-dumping” duty.
Blofield Decl. Ex. M, ECF No.
As a result, Denson argues that LDI was aware - prior to
Customs initiating the investigation in February 2009 - that the
hand trucks were not produced by Taifa.
Even if LDI was aware in April 2008 that the hand trucks were
not produced by Taifa,2 Denson’s argument is unavailing.
of the Customs investigation encompassed several shipments made
prior to April 2008.
Indeed, in its internal investigation, LDI
found antidumping duty discrepancies occurring between April 2005
and February 2008 and “broker clerical errors” occurring in July
Lind Decl. Ex. 8, ECF No. 64, at LDI00000280-82.
Customs found, as part of its investigation that LDI failed to
LDI contests such an assertion, arguing that, as recently as
2010, Denson maintained that the hand trucks were produced by
Taifa. See Lind Decl. Ex. 10, ECF No. 64.
comply with the antidumping duty on ten occasions.
Id. Ex. 13, at
Thus, any knowledge by LDI in April 2008 that the
hand trucks were not produced by Taifa, while potentially relevant,
does not bar the fraudulent misrepresentation claim because the
allegations relate, in part, to shipments predating such knowledge.
As a result, at this stage in the proceedings, summary judgment is
not warranted on the claim for fraudulent misrepresentation.
III. Fraudulent Omission
Denson next argues that summary judgment is warranted on the
fraudulent omission claim.
Under Minnesota law, “[t]he general
rule is that one party to a transaction has no duty to disclose
material facts to the other.”
L&H Airco, Inc. v. Rapistan Corp.,
446 N.W.2d 372, 380 (Minn. 1989) (citation and internal quotation
communicate facts to a particular person ... [who] is entitled to
Id. (citation and internal quotation marks
A duty to disclose facts may exist, however, “when a
confidential or fiduciary relationship exists; when disclosure is
necessary to clarify misleading information already disclosed; or,
when one party has special knowledge of material facts to which the
other party does not have access.”
Am. Computer Trust Leasing v.
Boerboom Int’l, Inc., 967 F.2d 1208, 1212 (8th Cir. 1992) (citation
and internal quotation marks omitted) (applying Minnesota law).
Here, Denson argues that it was not a fiduciary of LDI and had
no obligation to communicate facts about the manufacturing location
The court need not reach such an argument.
explained, LDI can potentially establish its fraudulent omission
previously-disclosed information or (2) demonstrating that Denson
had special knowledge of material facts that LDI did not have.
Here, LDI argues that Denson failed to correct its previous
assurances that the hand trucks were manufactured at Taifa, and
that material information about the manufacturing location was
exclusively within Denson’s control. As a result, at this stage in
the proceedings and without a fully-developed record, summary
judgment is not warranted on the fraudulent omission claim.
Breach of Contract
Finally, Denson argues that the breach of contract claim is
Specifically, Denson argues that the breach of contract
claim is subject to the four-year statute of limitations for sales
of goods, as set forth by Minnesota’s Uniform Commercial Code
LDI responds that the contract at issue was a contract for
services, not a contract for the sale of goods.
The Minnesota UCC
applies to all transactions in goods. See Minn. Stat. § 336.2-102.
Under the UCC, “goods” are “all things ... which are movable at the
time of identification to the contract for sale”
Id. § 336.2-
LDI argues that its contract with Denson was a contract
for services - that is, for serving as the liaison between LDI and
the manufacturing facilities - rather than for the hand trucks
Such an argument is unavailing.
When a contract arguably covers both goods and services,
“Minnesota courts use the predominant purpose test to determine
whether [the UCC] applies to such a contract or transaction.”
Distrib. Co. v. Whirlpool Corp., 137 F.3d 1083, 1086 (8th Cir.
1998) (citation and internal quotation marks omitted).
[for mixed contracts is] whether their predominant factor, their
thrust, their purpose, reasonably stated, is the rendition of
service, with goods incidentally involved ... or is a transaction
alteration in original) (citation omitted).
Here, LDI itself characterized the transaction as a purchase
of hand trucks from Denson.
See Countercl. ¶ 41.
purchase orders entered into by LDI and Denson focus on goods
rather than services.
For example, the purchase order includes
provisions regarding shipping, packaging, workmanship and type of
material - concepts that would not apply to a contract for the
provision of services.
See, e.g., Lind Decl. Ex. 16, ECF No. 64.
Further, only the hand trucks - and no services - are listed on the
invoices sent by Denson to LDI.
See, e.g., Wong Decl. Ex. 1.
a result, the court finds that the predominant purpose of the
contract was the sale of goods, and the Minnesota UCC - with its
four-year statute of limitations - applies to the contract at
limitations applies, its claim is still timely. A claim for breach
of a sale of goods contract “must be commenced within four years
after the cause of action has accrued.”
Minn. Stat. § 336.2-
LDI argues that the cause of action accrued when it
discovered in February 2009 that it may have violated the antidumping regulations. Minnesota’s UCC explicitly provides, however,
regardless of the aggrieved party’s lack of knowledge of the
Id. § 336.2-725(2).
As a result, the cause of action
accrued on October 14, 2008 - the date of the last shipment of hand
trucks - which was more than four years prior to the commencement
of this action on January 29, 2013.
Therefore, the breach of
contract claim is untimely, and summary judgment is warranted as to
Accordingly, based on the above, IT IS HEREBY ORDERED that the
motion for summary judgment [ECF No. 49] is granted in part,
consistent with this order.
July 9, 2014
s/David S. Doty
David S. Doty, Judge
United States District Court
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