Datalink Corporation v. Perkins Eastman Architects, P.C.
Filing
53
MEMORANDUM OPINION AND ORDER granting in part 38 Motion for Summary Judgment. See Order for deadlines on additional briefing. (Written Opinion). Signed by Judge Susan Richard Nelson on 06/08/15. (SMD)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Datalink Corporation,
Case No. 13-cv-2978 (SRN/HB)
Plaintiff,
v.
MEMORANDUM OPINION AND
ORDER
Perkins Eastman Architects, P.C.,
Defendant.
Amanda J. Rome, Michael F. Cockson, and Staci L. Perdue, Faegre Baker Daniels LLP,
90 South 7th Street, Suite 2200, Minneapolis, MN 55402-3901, for Plaintiff.
Kyle A. Eidsness and Douglas J. McIntyre, Foley & Mansfield, PLLP, 250 Marquette
Ave, Suite 1200, Minneapolis, MN 55401, for Defendant.
SUSAN RICHARD NELSON, United States District Judge
I.
INTRODUCTION
This matter is before the Court on Plaintiff’s Motion for Summary Judgment [Doc.
No. 38]. For the reasons set forth below, the Court grants, in part, Plaintiff’s motion.
II.
BACKGROUND
Plaintiff Datalink Corp. (“Datalink”) brought this suit against Defendant Perkins
Eastman Architects, P.C. (“Perkins Eastman”) alleging breach of contract and unjust
enrichment. (See Notice of Removal, Ex. A, “Compl.” ¶¶ 16–27 [Doc. No. 1-1].)
Datalink is a “data center solutions company that provides information technology
services.” (See id. ¶ 2.) Perkins Eastman is an international planning, design, and
consulting firm with multiple offices in the United States and around the world. (See id.
¶ 3.)
In early 2012, Alan Ho, Perkins Eastman’s Senior Associate Director, Systems,
and Kim Lam, Associate Principal Director, Technology, contacted a North Carolina
corporation, StraTech, regarding issues with Perkins Eastman’s data backup solution.
(See Aiello Decl. ¶ 2 [Doc. No. 13].) Over the course of the following few months, the
parties analyzed Perkins Eastman’s backup system, and StraTech ultimately
recommended replacing it with Symantec NetBackup (“NBU”) and Symantec NBU
appliances. (Id.)
In October 2012, StraTech was acquired by Datalink. (Id. at ¶ 3.) At that time,
Datalink’s New York-based account executive, John Aiello, presented an overview of the
company to Ho and Kim, and explained that Datalink was headquartered in Minnesota,
where its operations were also managed. (Id.) Subsequent to that meeting, Perkins
Eastman decided to follow Datalink’s recommendation to replace their legacy data
backup system with Symantec NBU and NBU appliances. On December 27, 2012, Lam
sent a signed Purchase Order to that effect to Aiello via e-mail, who then forwarded it to
Datalink headquarters in Minnesota for processing. (Id. at ¶¶ 5, 6.)
Upon receipt of the Purchase Order, Datalink obtained the various hardware,
software, and personnel resources needed to complete the project, confirmed Defendant’s
creditworthiness, and began ordering the necessary equipment and pre-configuring it
based on specifications provided by Defendant. (Id. at ¶¶ 7, 8, 10, 11.) After the NBU
appliances were configured, Datalink warehouse employees re-packaged and shipped the
2
hardware from Minnesota to Perkins Eastman’s data center locations across the United
States in early March 2013. (Id. at ¶ 11.) Datalink also sent invoices to Defendant
totaling $761,849.06. (See Compl., Ex. E, “Invoices” [Doc. No. 1-1].)
According to the President and COO of Perkins Eastman, J. David Hoglund, when
the NBU appliances arrived to Defendant’s office locations, several of the boxes were
opened and one of the appliances was installed. (See Hoglund Dep. 60:17–22, 73:19–25,
Jan. 26, 2015 [Doc. No. 41-1].)
Defendant contends that Lam lacked actual and apparent authority to sign the
purchase agreement for the NBU equipment. (See Def.’s Mem. at 3 [Doc. No. 46].) In
fact, Perkins Eastman contends that its “Board of Directors was unaware of the signed
[P]urchase [O]rder until Lam revealed he had signed an agreement in an email to
[President] David Hoglund on April 25, 2013.” (See id. at 4) (citing McIntyre Decl., Ex.
F, “Emails Between Lam and Hoglund” [Doc. No. 48-6]). On May 13, 2013, Defendant
informed Plaintiff that it no longer wanted the NBU equipment. (See Cockson Decl., Ex.
Q, “Email from Frank Giannelli to John Aiello” [Doc. No. 41-17]; Hoglund Dep.
134:25–135:14 [Doc. No. 41-1].) Perkins Eastman subsequently refused to pay any of
the invoices sent by Datalink for work performed under the NBU Purchase Order.
(Compl. at ¶ 13 [Doc. No. 1-1].)
The purchase agreement between Datalink and Symantec prohibited Datalink from
reselling used Symantec equipment. (See Rome Decl. Ex. F, “Symantec Agreement” §
2.3(vi) (stating that “[r]eseller shall not . . . resell the Symantec Offerings to Individuals
or entities other than the applicable End User [Perkins Eastman] for which such items
3
were ordered.”) [Doc. No. 50-1]; Westenfield Dep. 100:4–19 [Doc. No. 41-2].) Although
the NBU equipment could not be resold, the contract did not prohibit Symantec from
accepting returned hardware and software. Ultimately, Symantec agreed to refund the
NBU software and related costs, but it did not accept return of the hardware. (See id. at
52:10–15, 95:19–96:2.) Accordingly, Symantec credited Datalink $276,721.34 for the
software, maintenance, and training credits. (See Cockson Decl., Ex. R, “Symantec
Credit” [Doc. No. 41-18].) Perkins Eastman remains in possession of the NBU hardware,
and has refused to pay for the goods and services delivered. (See Hoglund Dep. 210:18–
211:2 [Doc. No. 41-1]; Cockson Decl., Ex. S, “Def.’s Resp. to Pl.’s Requests for
Admission” at 3–4 [Doc. No. 41-19].) Defendant contends that the terms of the NBU
contract are ambiguous. Specifically, Perkins Eastman argues that because there was no
signed statement of work (“SOW”), Plaintiff cannot hold Defendant liable for the unpaid
invoices. (See Def.’s Mem. at 4 [Doc. No. 46].)
After Datalink was unsuccessful in collecting the past-due amounts from Perkins
Eastman, Plaintiff commenced this action in Minnesota state court in September 2013. In
Count I, Plaintiff alleges that Defendant breached the contract between the parties by
failing to pay the delinquent balance of $761,849.06, in addition to interest, fees, and
costs associated with collecting these amounts. (See Compl. ¶ 19 [Doc. No. 1-1].)
Although no signed SOW exists between the parties, Plaintiff claims that the Purchase
Order between Datalink and Perkins Eastman constitutes an enforceable, written contract.
(See id. ¶ 17.) In Count II, Plaintiff alleges that Defendant was unjustly enriched because
it received a significant benefit for which it had not paid. (See id. ¶ 23.) Datalink
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explains that “it would be inequitable and unjust for Perkins Eastman to retain the benefit
of Datalink’s goods and services without paying.” (See id. ¶ 26.) On October 30, 2014,
Perkins Eastman removed the action to this Court on diversity grounds. (See Notice of
Removal [Doc. No. 1].) Plaintiff filed its Motion for Summary Judgment on February 6,
2015 [Doc. No. 38]. In support of its motion, Datalink filed a memorandum [Doc. No.
40], a declaration [Doc. No. 41], and numerous exhibits, including deposition transcripts,
emails, invoices, and letters exchanged between the parties. On February 27, 2015,
Defendant filed its response brief [Doc. No. 46], a declaration and several supporting
exhibits [Doc. No. 48]. Plaintiff filed its reply on March 13, 2015 [Doc. No. 49]. The
Court heard oral argument on Plaintiff’s motion on March 20, 2015.
III.
DISCUSSION
A. Standard of Review
Summary judgment is proper if, drawing all reasonable inferences in favor of the
non-moving party, there is no genuine issue as to any material fact and the moving party
is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50
(1986). “Summary 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.’”
Celotex Corp., 477 U.S. at 327 (quoting Fed. R. Civ. P. 1).
The party moving for summary judgment bears the burden of showing that the
material facts in the case are undisputed. Id. at 323. However, “a party opposing a
5
properly supported motion for summary judgment may not rest upon mere allegation or
denials of his pleading, but must set forth specific facts showing that there is a genuine
issue for trial.” Anderson, 477 U.S. at 256. “Only disputes over facts that might affect
the outcome of the suit under the governing law will properly preclude the entry of
summary judgment. Factual disputes that are irrelevant or unnecessary will not be
counted.” Id. at 248. Moreover, summary judgment is properly entered “against a party
who fails to make a showing sufficient to establish the existence of an element essential
to that party’s case, and on which that party will bear the burden of proof at trial.”
Celotex Corp., 477 U.S. at 322. Plaintiff moves for summary judgment on both its
breach of contract and unjust enrichment claims. Both claims are discussed in detail
below.
B.
Count I: Breach of Contract
Under Minnesota state law, Datalink must prove the following four elements to
succeed on its breach of contract claim: (1) a contract was formed, (2) the plaintiff
performed the conditions precedent, (3) the defendant breached the contract, and (4)
damages resulted from the defendant’s breach. See Thomas B. Olson & Assocs., P.A. v.
Leffert, Jay & Polglaze, P.A., 756 N.W.2d 907, 918 (Minn. Ct. App. 2008), review
denied (Minn. Jan. 20, 2009); Border State Bank of Greenbush v. Bagley Livestock
Exchange, Inc., 690 N.W.2d 326, 335–36 (Minn. Ct. App. 2004), review denied (Minn.
Feb. 23, 2005). 1
1
“A federal court sitting in diversity must apply the choice of law principles of the
state in which it sits, in this case Minnesota.” Fla. State Bd. of Admin. v. Law Eng’g &
6
Plaintiff contends that no genuine issue of material fact exists about the
aforementioned elements of its breach of contract claim. Additionally, Datalink argues
that Defendant has failed to raise a fact issue as to whether Perkins Eastman is entitled to
a rescission defense. The Court agrees, and grants Plaintiff’s Motion for Summary
Judgment with respect to Defendant’s liability for Plaintiff’s Count One.
1. Formation of Contract
As to the formation of the contract, Defendant argues that substantial uncertainty
exists about the scope of the work because the parties did not sign a SOW. (See Def.’s
Mem. at 7 [Doc. No. 46].) Perkins Eastman claims that the lack of a signed SOW
demonstrates “Defendant’s reluctance to consummate a deal in writing.” (See id.) The
Court disagrees, and finds that no genuine issue of material fact exists as to whether the
parties formed a contract. See Thomas B. Olson & Assocs., P.A., 756 N.W.2d at 918.
“Summary judgment is ‘inappropriate where terms of a contract are at issue and
those terms are ambiguous or uncertain.’” Toll Bros. v. Sienna Corp, No. 06-cv-4378
(DSD/JJG), 2008 WL 2986685, at *3 (D. Minn. July 30, 2008) (quoting Bank Midwest,
Minn., Iowa, N.A. v. Lipetzky, 674 N.W.2d 176, 179 (Minn. 2004)). “The construction
and effect of a contract” is a question of law, “unless the contract is ambiguous.”
Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 346 (Minn. 2003). “Where there is a
written instrument, the intent of the parties is determined from the plain language of the
Envtl. Servs., Inc., 262 F. Supp. 2d 1004, 1010 (D. Minn. 2003) (citing Fuller v. Hartford
Life Ins. Co., 281 F.3d 704, 707 (8th Cir. 2002)); (see generally 7/16/14 Order (holding
that the Court properly sits in diversity jurisdiction and has personal jurisdiction over the
parties in this case) [Doc. No. 18]).
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instrument itself.” Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271
(Minn. 2004). “‘A contract is ambiguous if, based upon its language alone, it is
reasonably susceptible of more than one interpretation.’” Denelsbeck, 666 N.W.2d at
346 (quoting Art Goebel, Inc. v. N. Suburban Agencies, Inc., 567 N.W.2d 511, 515
(Minn. 1997)). “Basic contract principles instruct that ‘[w]here a writing refers to
another document, that other document, or the portion to which reference is made,
becomes constructively a part of the writing, and in that respect the two form a single
instrument. The incorporated matter is to be interpreted as part of the writing.’” Halbach
v. Great-W. Life & Annuity Ins. Co., 561 F.3d 872, 876 (8th Cir. 2009). Even a mere
reference, within a signed document, to an unsigned document is “sufficient as a legal
matter to incorporate the attached [document].” Id.
Here, a signed, unambiguous written instrument exists between the parties. See
id.; Travertine Corp., 683 N.W.2d at 271. On behalf of Perkins Eastman, Lam, signed a
Purchase Order with Datalink for the NBU Project. (See Rome Decl., Ex. R, “Purchase
Confirmation and Approval” [Doc. No. 50-1].) According to the Purchase Order, the
parties agreed that Datalink would install Symantec NBU hardware and software, and
that Datalink would provide training for the NBU equipment. (See id. at 1.) The
agreement also references, and thus incorporates, an earlier SOW that was initially
created between StraTech and Perkins Eastman. (See id. at 3) (referencing “SOW #14”);
Halbach, 561 F.3d at 876.
The fact that the StraTech SOW between the parties was unsigned has no legal
significance. Because the Purchase Order was signed, and it referenced the StraTech
8
SOW, that reference alone is sufficient to legally incorporate the StraTech SOW. See id.
Also, as Plaintiff correctly notes, it is irrelevant that the SOW, “bears the name StraTech
rather than Datalink.” (See Pl.’s Reply at 19 [Doc. No. 49].) Once Datalink acquired
StraTech in 2012, Datalink assumed StraTech’s duties and obligations, including those
set forth in the Purchase Order and the incorporated SOW. 2 (See Westenfield Dep.
28:1–9 [Doc. No. 41-2]); Minn. Stat. § 302A.661, subd.4 (stating that “transferee is liable
for the debts, obligations, and liabilities of the transferor only to the extent provided in
the contract or agreement between the transferee and transferor or to the extent provided
by this chapter or other statutes of this state.”) (2015). Therefore, it is immaterial that the
SOW incorporated into the Purchase Order was unsigned and bears StraTech’s name.
Once Datalink began to work directly with Perkins Eastman, the parties created
four successive, updated versions of the SOW. (See Rome Decl., Exs. G, H, I, J
“Datalink SOWs” [Doc. No. 50-1].) Each of these versions of the SOW, however, did
not at all alter the NBU Project hardware and software requirements. Because these
requirements were fixed in the signed Purchase Order, the portion of the SOWs that
summarized the hardware and software necessary for the project necessarily remained the
same. (See id. § 2.1 “Scope Boundaries.”) Rather, the Datalink SOWs only fine-tuned
2
The Court also notes that even the specific individuals who negotiated the NBU
Project remained the same after Datalink acquired StraTech. Prior to the acquisition,
Aiello of StraTech and Lam of Perkins Eastman were negotiating the NBU Project
contract. (See Westenfield Dep. 26:23–28:9 [Doc. No. 41-2].) After Datalink acquired
StraTech, Aiello and Lam continued negotiating the NBU Project contract, but Aiello
represented Datalink, rather than StraTech. (See Cockson Decl., Ex. E, “Email from
John Aiello to Perkins Eastman” (stating that on Nov. 19, 2012, the parties planned to
discuss Datalink’s acquisition of StraTech) [Doc. No. 41-5].)
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the service component of the NBU Project. (See generally id.) Therefore, even if these
successive SOWs adequately modified the StraTech SOW, 3 they did not alter the signed
Purchase Order, and therefore, the material terms of the contract pertaining to the
hardware and software requirements did not change.
Additionally, the Court notes that insofar as Defendant contends that the
successive SOW drafts are evidence of a lack of mutual assent between the parties to
agree to the NBU Project at all, the Court disagrees. The parties clearly assented to the
NBU Project by signing a Purchase Order, which incorporated the StraTech SOW.
While the successive SOWs demonstrate that the parties continued to “fine-tune[] the
project’s service needs,” that fine-tuning “is evidence, if anything, of an intent to proceed
with the project,” rather than evidence of a lack of agreement between the parties. (See
Pl.’s Reply at 6 (emphasis original) [Doc. No. 49].) In fact, Perkins Eastman clearly
intended to proceed with the project because Datalink even hosted a “Project Kickoff”
with Defendant on February 14, 2013, about two months after the Purchase Order was
signed. (See Ho Decl., Ex. A, “Datalink Project Kickoff Presentation” [Doc. No. 15-1].)
In sum, the Court holds that no genuine issue of material fact exists as to the existence of
a binding contract, which required Plaintiff to deliver NBU equipment and provide
training and service, and also required Defendant to pay for this equipment and service.
2. Plaintiff Performed Conditions Precedent
The Court also finds that no genuine issue of material facts exists as to whether
Plaintiff performed the conditions precedent set forth in the contract. See Thomas B.
3
The Court discusses the issue of modification in detail in Part III(B)(4)(b).
10
Olson & Assocs., P.A., 756 N.W.2d at 918. “A condition precedent ‘is any fact or event,
subsequent to the making of a contract, which must exist or occur before a duty of
immediate performance arises under the contract.’” Krogness v. Best Buy Co., Inc., 524
N.W.2d 282, 287 (Minn. Ct. App. 1994) (citing National City Bank v. St. Paul Fire &
Marine Ins. Co., 447 N.W.2d 171, 176 (Minn. 1989)). In order to trigger Defendant’s
obligation to pay for the goods and services, the contract between the parties required
Plaintiff to purchase the hardware and software from Symantec, deliver the equipment to
Perkins Eastman, and provide Perkins Eastman with relevant training for the NBU
Project. (See Rome Decl., Ex. R, “Purchase Confirmation and Approval” [Doc. No. 501].)
Datalink satisfied all of the required conditions above, but stopped short of
providing all of the hours of service it intended to provide because Perkins Eastman
informed Datalink, on May 13, 2013, that it no longer wanted to continue with the NBU
Project. First, Datalink paid Symantec for the NBU Project equipment. (See Westenfield
Dep. 56:19–57:1 [Doc. No. 50-1].) By March 27, 2013, Datalink had also delivered all
of the NBU equipment to Perkins Eastman. (See Hoglund Dep. 60:17–22; 73:11–18
[Doc. No. 40-1].) Perkins Eastman does not dispute that Datalink delivered the NBU
Project equipment. (See Cockson Decl., Ex. S, “Def.’s Resp. to Pl.’s Requests for
Admission” at 3 [Doc. No. 41-19].) In fact, Perkins Eastman unpacked the equipment
and even partially installed it. (See Hoglund Dep. 73:19–25; 210:18–211:2; Rome Decl.,
Ex. P, “Emails Between Douglas Hall and Alan Ho” [Doc. No. 50-1].) By March 27,
2013, Datalink had rendered thirty hours of professional services, which amounted to
11
$7,734.88. (See Pl.’s Reply at 13 n.5 [Doc. No. 49]; Cockson Decl., Ex. S, “Def.’s Resp.
to Pl.’s Requests for Admission” at 3 [Doc. No. 41-19]; Hoglund Dep. 156:11–13;
210:18–211:2 [Doc. No. 41-1].) 4 Therefore, no genuine issue of material fact exists as to
whether Plaintiff performed the conditions precedent set forth in the contract.
3. Defendant Breached the Contract
The Court also finds that no genuine issue of material fact exists as to whether
Defendant breached the contract by failing to pay Plaintiff for the equipment delivered
and services rendered. See Thomas B. Olson & Assocs., P.A., 756 N.W.2d at 918.
Perkins Eastman readily admitted in its Response to Plaintiff’s Request for Admissions
that although it had received invoices from Datalink relating the NBU Project, it has not
paid Datalink for the goods and services that Datalink provided. (See Cockson Decl., Ex.
S, “Def.’s Resp. to Pl.’s Requests for Admission” at 4 [Doc. No. 41-19].) Because the
Purchase Order unambiguously binds Defendant to pay for the goods and services
rendered by Datalink, Perkins Eastman clearly breached its contract with Datalink. (See
Rome Decl., Ex. R, “Purchase Confirmation and Approval” [Doc. No. 50-1].)
Regardless of which SOW governs the relationship between the parties, the signed
Purchase Order obligated Perkins Eastman to pay for the NBU equipment and training
hours rendered by Plaintiff. (See id.) Therefore, the Court finds that no genuine issue of
material fact exists as to whether Defendant breached the contract.
4
Although Datalink did not continue to provide training for Perkins Eastman after
receiving an email from Frank Giannelli on May 13, 2013, which stated that Perkins
Eastman no longer wanted the NBU equipment, Perkins Eastman had accepted Datalink’s
services until that point.
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4. Damages Resulted from Defendant’s Breach
Plaintiff also contends that no genuine issue of material fact exists as to whether
damages resulted from Defendant’s breach. See Thomas B. Olson & Assocs., P.A., 756
N.W.2d at 918. Summary judgment is inappropriate where damages are in dispute. See
Textron Fin. Corp. v. Weeres Indus. Corp., No. 10-cv-2070 (JRT/LIB), 2011 WL
2682901, at *11 (D. Minn. June 17, 2011); Odens Family Props., LLC v. Twin Cities
Stores, Inc., 393 F. Supp. 2d 824, 830–31 (D. Minn. 2005) (holding that factual issues
precluded summary judgment on amount of damages). The parties agree that the
Uniform Commercial Code (“UCC”) governs this dispute because the predominant
purpose of the contract between the parties was for the sale of goods. 5 (See Def.’s Mem.
at 16 [Doc. No. 46]; Pl.’s Reply at 10 [Doc. No. 49].) Minnesota law dictates that
remedies provided by the UCC “must be liberally administered to the end that the
aggrieved party may be put in as good a position as if the other party had fully
performed.” See Minn. Stat. § 336.1-305(a) (2015). The Court defers ruling on
5
Pursuant to the “predominant factor” test used by Minnesota courts to determine
whether the UCC applies to a contract for mixed good and services, courts have primarily
focused on the relative cost of the services compared to the cost of goods. See Duxbury
v. Spex Feeds, Inc., 681 N.W.2d 380, 386–87 (Minn. Ct. App. 2004); Valley Farmers’
Elevator v. Lindsay Bros. Co., 398 N.W.2d 553, 556 (Minn. 1987) (classifying a
transaction as a sale of goods where the labor cost was only $120,000 and the materials
were more than $380,000) (overruled on other grounds); OneBeacon Ins. Co. v. Datalink
Corp., No. A08-0992, 2009 WL 1311787, at *3 (Minn. Ct. App. May 12, 2009) (finding
that the predominant purpose of a Datalink contract was for the sales of goods where the
cost of goods outweighed the cost of services). Here, the relative cost of goods
($650,000) far outweighs the cost of services ($55,000). Therefore, the predominant
purpose of the transaction was the sale of goods.
13
Plaintiff’s motion as it applies to damages for Count I, and holds that additional briefing
is required to determine the precise amount of damages that Plaintiff is owed.
a. Datalink is Entitled to (1) the Full Contract Price of Goods and
Services Rendered Because Perkins Eastman Accepted the
Goods and (2) the Profit Margin on Software, Training, and
Maintenance that was Returned to Symantec
Pursuant to Minnesota law, a “buyer must pay at the contract rate for any goods
accepted.” See Minn. Stat. § 336.2-607(1) (2015). “Acceptance of goods results when
the buyer (1) after inspection signifies that the goods conform to the contract or that the
buyer will retain the goods notwithstanding nonconformity, (2) fails to make an effective
rejection after a reasonable opportunity to inspect the goods, or (3) acts inconsistently
with the seller’s ownership.” Larson v. Felix, No. A06-931, 2007 WL 1412906, at *2
(Minn. Ct. App. May 15, 2007) (citing Minn. Stat. § 336.2-606(1)). Minnesota Statute §
336.2-602 clarifies that “[r]ejection of goods must be within a reasonable time after their
delivery or tender,” and rejection is “ineffective unless the buyer seasonably notifies the
seller.” See Minn. Stat. Ann. § 336.2-602(1) (2015).
Here, the record plainly shows that Datalink delivered goods that conformed to the
specifications in the contract. Defendant has not presented any evidence that the NBU
Project equipment was non-conforming. Insofar as Defendant argues that the goods
could not have been conforming absent a signed SOW, the Court disagrees. As outlined
above, an unsigned SOW can be incorporated into a signed purchase order and both may
form the basis of a valid and binding contract. Moreover, the Court notes that the
successive SOWs dealt with outstanding issues of professional services, but the hardware
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and software requirements remained the same, because they were set forth in the signed
Purchase Order. (See Rome Decl., Exs. G, H, I, J “Datalink SOWs” [Doc. No. 50-1];
Pl.’s Reply at 6 n.2 [Doc. No. 49].) Thus, the delivered equipment conformed to the
requirements set forth in the binding Purchase Order.
Moreover, the record demonstrates that Perkins Eastman accepted the goods by
unpacking the equipment, partially installing it, and keeping the equipment in its
possession. (See Hoglund Dep. 60:17–22; 73:19–25; 210:18–211:2 [Doc. No. 41-1];
Cockson Decl. Ex. P, “Email from Chris Micknowicz” (confirming that one piece of
NBU equipment was “mounted”) [Doc. No. 41-16]; Rome Decl., Ex. P, “Email from
Douglas Hall” (confirming that NBU equipment arrived and asking whether he should
“start to mount them”) [Doc. No. 50-1]); see also Nw. Airlines, Inc. v. Aeroservice, Inc.,
168 F. Supp. 2d 1052, 1054 (D. Minn. 2001) (explaining that “under Minnesota law a
buyer accepts goods if he fails to explicitly reject them during a reasonable inspection
period.”); Hanson v. Hartmann, No. C3-00-160, 2000 WL 1577057, at *3 (Minn. Ct.
App. Oct. 24, 2000) (holding that buyer accepted the goods when he received them,
permitted their installation, and retained them).
Because Perkins Eastman accepted the NBU Project equipment, Datalink is
entitled to the contract price set forth in the Purchase Order, not including the amount that
Symantec credited Datalink for the returned software. See Minn. Stat. § 336.2-607(1)
(stating that “[t]he buyer must pay at the contract rate for any goods accepted”); Minn.
Stat. § 336.2-709(a)(1) (stating that “[w]hen the buyer fails to pay the price as it becomes
due the seller may recover . . . the price of (a) goods accepted.”); see also Tapemark Co.
15
v. E-Z Cleaners, LLC, No. 10-cv-813 (SRN/TNL), 2012 WL 246053, at *6 (D. Minn.
Jan. 25, 2012) (holding that defendant formed valid contract with plaintiff by accepting
all of the units delivered, without objection, and reselling the vast majority of them);
Ames Eng’g Corp. v. Lighthouse Bay Foods, Inc., No. C6-99-372, 1999 WL 595393, at
*2 (Minn. Ct. App. Aug. 10, 1999) (same).
In its brief, Datalink argues that the contract price of the hardware accepted by
Perkins Eastman, including taxes and freight, is $330,033.22. (See Pl.’s Mem. at 14
(citing invoices attached to Compl.) [Doc. No. 40].) In addition to the NBU equipment,
Datalink also provided thirty hours of professional services for Perkins Eastman. Those
services amount to $7,734.88. (See id.)
Datalink also claims that it is entitled to an additional $72,835.01, which would
have been its profit on the software that was returned to Symantec. (See id. at 14–15.)
Plaintiff explains that if it had not mitigated its damages by asking Symantec to accept
the returned software, then it would be entitled to the full contract price of the software,
which necessarily includes the profit margin. (See id. at 15 (citing Minn. Stat. § 336.2709).) Specifically, Datalink claims that it should “not be put in a worse position than if
[sic] it would have been had it not mitigated its damages – particularly where, as here, it
had no obligation to do so.” (See id.) Thus, in sum, Plaintiff argues that it is entitled
$402,868.23.
(i)
“Amended and Final Invoice” is a Settlement Offer
Defendant contends that the value of damages that Plaintiff is entitled to remains
an issue of material fact, because an “amended and final invoice” sent from Datalink to
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Perkins Eastman demonstrates that the total amount in dispute is actually $367,789.73.
(See Def.’s Mem. at 9 [Doc. No. 46]; McIntyre Decl., Ex. K, “Datalink Letter” [Doc. No.
48-11].) The document that Defendant refers to as the “amended and final invoice” is an
October 24, 2013 letter from the CFO of Datalink, Gregory Barnum, to David Hoglund,
the President of Perkins Eastman. (See id.) The letter requests Hoglund to “accept this
letter as [Datalink’s] amended and final invoice” and states and that “[p]ayment in full
must be received by Friday, October 25th, 2013,” and “[o]nce full payment . . . is
received and Symantec provides full credit for returned software all legal filings will be
removed.” (See id.) The $367,789.73 amount requested by Datalink in this letter
explicitly subtracts credits that Perkins Eastman received for returning NBU software to
Symantec. (See id.)
Perkins Eastman contends that whether this “final invoice” modified the parties’
agreement is a question of material fact. In opposition, Datalink argues that this
document is not in fact a final, accurate “invoice,” but is rather a settlement agreement
that is inadmissible under Federal Rule of Evidence 408. (See Pl.’s Reply at 15 [Doc.
No. 49].) The Court agrees.
According to Rule 408, a party may not use settlement negotiations to “prove or
disprove the validity or amount of a disputed claim.” See Fed. R. Evid. 408(a); see
Buffalo Wild Wings, Inc. v. Buffalo Wings & Rings, No. 09-cv-1426 (JRT/SER), 2011
WL 4537970, at *6 (D. Minn. Sept. 29, 2011) (relying on Fed. R. Evid. 408 and
prohibiting testimony about the parties’ pre-suit settlement discussions). “Rule 408
recognizes that the parties to litigation should be at liberty to discuss settlement without
17
concern that those discussions will be publicized as reflecting on the merits of the parties’
respective positions.” Moubry v. Kreb, 58 F. Supp. 2d 1041, 1043 n.1 (D. Minn. 1999).
Here, Plaintiff sent this letter to Defendant one month after initiating this lawsuit.
The letter expressly stated that if Perkins Eastman paid $367,789.73 by October 24, 2013,
“all legal filings w[ould] be removed.” (See McIntyre Decl., Ex. K, “Datalink Letter”
[Doc. No. 48-11].) It appears clear to the Court that offering to end a legal proceeding,
which has already been initiated, on the condition of the acceptance of a set sum of
money by a certain date, is the quintessence of a settlement offer. See Fiebelkorn v.
IKON Office Solutions, Inc., 668 F. Supp. 2d 1178, 1187 n.7 (D. Minn. 2009)
(explaining that a request from one party to another party to exchange payment for the
abandonment of claims is a settlement offer barred by Fed. R. Evid. 408).
Moreover, even the President of Perkins Eastman characterized this October 2013
letter as part of the parties’ “negotiations” to “resolve this [matter] promptly” and “avoid
[further] litigation.” (See Rome Decl., Ex. C, Giannelli Dep., Ex. 13 “Emails Between
Hoglund and Giannelli” [Doc. No. 50-1].) During his deposition, Hoglund was asked
about his email communications with Frank Giannelli, the Vice President of Datalink.
Hoglund explained that he emailed with Giannelli about the October 2013 letter, and
described the emails as pertaining to “resolving a financial settlement between the
parties.” (See Hoglund Dep. 216:7–17 [Doc. No. 41-1].) Therefore, even the President
of Perkins Eastman classifies the letter as a tool used for settlement negotiations.
Defendant analogizes this case to C.J. Duffey Paper Co. v. Reger, in which the
Minnesota Court of Appeals held that the trial court did not err in determining that the
18
letter in question “did not constitute an offer to compromise an actual dispute under
[R]ule 408.” See 588 N.W.2d 519, 525 (Minn. Ct. App. 1999). However, C.J. Duffey
Paper Co. is distinguishable because the letter in that case, which proposed to pay the
appellee an amount that appellants undisputedly owed him at the time, was sent before
either party had ever “directly asserted any claims against [the other party].” See id. at
524. Thus, technically, at the time the letter was sent, the parties did not have a dispute,
and were not in active litigation. In stark contrast, here, Datalink sent the settlement offer
to Perkins Eastman one month after it had initiated this lawsuit.
Additionally, in C.J. Duffey Paper Co., the appellee sought to offer the letter as
evidence of bad faith, rather than to establish the validity or existence of a claim or its
amount. See id. at 525 (finding that the letter was not “offered to establish the amount of
[the appellee’s] claim,” and holding that “[b]ecause the letter did not constitute an offer
of settlement and was offered neither as evidence of liability or damages, the trial court
was not required to exclude it.”) Here, Perkins Eastman seeks to offer the “amended and
final invoice” precisely to establish the validity of the damages amount. Therefore, the
Court disregards the October 2013 letter, and holds that the letter is not a basis to find a
factual dispute about the amount of damages due in this case. See Brogren v. Pohlad,
960 F. Supp. 1401, 1407 (D. Minn. 1997) (explaining that because “[e]vidence submitted
in response to a summary judgment motion must be admissible,” a letter, which was
inadmissible under Fed. R. Evid. 408, was not considered by the court).
(ii)
Plaintiff Sufficiently Mitigated its Damages
Defendant also argues that Plaintiff is not entitled to the full damages value it
19
seeks because Datalink did not sufficiently mitigate its damages with respect to the NBU
Project hardware. (See Def.’s Mem. at 15 [Doc. No. 46].) Defendant’s argument is twofold. First, Perkins Eastman claims that it is factually unclear whether Datalink even
attempted to return the NBU hardware to Symantec because Denise Westenfield, the
Vice President, Controller, and Chief Accounting Officer of Datalink, could not confirm
during her deposition whether Datalink asked Symantec if it would accept returned
hardware. (See id.) Second, Perkins Eastman contends that the existence, and therefore
application, of a partnership agreement between Datalink and Symantec, which
prohibited Datalink from reselling the hardware, is in question. (See id. at 16.)
As to Defendant’s first argument about the significance of Westenfield’s
deposition testimony, the Court finds Defendant’s position meritless. Although
Westenfield could not confirm “for a fact that Datalink did ask Symantec if it would take
the hardware back,” (see Westenfield Dep. 97:2–4 [Doc. No. 41-2]), other undisputed
evidence in the record shows that Datalink did in fact inquire about the return of the NBU
hardware. According to an email exchange between John Sorensen of Symantec and
Frank Giannelli of Datalink, Datalink asked Symantec about its willingness to accept
returned NBU hardware, and Symantec informed Datalink on October 28, 2013 that it
would “not refund the hardware.” (See Rome Decl., Ex. D, “Sorensen Email” [Doc. No.
50-1].) Thus, Westfield’s uncertainty about Datalink’s mitigation efforts is immaterial
because the record demonstrates that Datalink asked Symantec if it would be willing to
accept the NBU hardware.
As to the merits of Defendant questioning the existence and application of the
20
partnership agreement between Datalink and Symantec, the Court finds that this
argument also fails. Datalink’s partnership agreement with Symantec expressly bars
Datalink from reselling Symantec equipment to anyone other than the end user for which
it was ordered. (See Rome Decl. Ex. F, “Symantec Agreement” § 2.3(vi) (stating that
“[r]eseller shall not . . . resell the Symantec Offerings to Individuals or entities other than
the applicable End User [Perkins Eastman] for which such items were ordered.”) [Doc.
No. 50-1]; Westenfield Dep. 100:4–19 [Doc. No. 41-2].) Therefore, neither the existence
of the partnership agreement, nor its application is in question. It is an undisputed issue
of fact that the partnership agreement prohibited Datalink from mitigating its damages by
reselling the NBU equipment.
Datalink significantly mitigated its damages by facilitating discussions between
Perkins Eastman and Symantec. These discussions resulted in a return of the NBU
software, and reduced Datalink’s damages by more than $276,000. (See Cockson Decl.
Ex. R, “Symantec Credit” [Doc. No. 41-18]; Rome Decl., Ex. E, “Datalink’s Answers to
Perkins Eastman’s Interrogs.” at 13–15 [Doc. No. 50-1].) The Court also notes that it
was difficult, if not impossible, for Datalink to further mitigate its damages with respect
to the NBU hardware because the equipment was specially configured and designed for
Perkins Eastman. In fact, Datalink and Perkins Eastman both agree that the resale value
of hardware was only ten to twenty percent of its original contract price. (See Hoglund
Decl. 75:1–8 [Doc. No. 41-1]; Cockson Decl., Ex. V, “Missling Correspondence” [Doc.
No. 41-22].)
Moreover, the Court notes that it is unclear whether Plaintiff was required to
21
mitigate its damages, even to the extent that it did. Although North Carolina law appears
to govern the Court’s interpretation of the StraTech SOW, 6 Minnesota law governs the
Court’s interpretation of the Datalink SOWs, 7 and Minnesota law also governs the
general contract law issues in this case, see Fla. State Bd. of Admin., 262 F. Supp. 2d at
1010. Under Minnesota law, “after the breaching party has accepted the goods, the nonbreaching party has no duty to mitigate its losses by accepting return of the goods or
proactively repossessing the goods without permission.” See Land O’Lakes Purina Feed
LLC v. Jaeger, 976 F. Supp. 2d 1073, 1076 (S.D. Iowa 2013) (analyzing Minnesota UCC
law). Here, Perkins Eastman accepted the NBU Project hardware and still maintains
possession of it. Accordingly, under Minnesota law, Datalink had no duty to mitigate its
damages by accepting the return of the goods or proactively repossessing them.
However, under North Carolina law, “‘an injured plaintiff, whether his case be tort
or contract, must exercise reasonable care and diligence to avoid or lessen the
consequences of the defendant’s wrong.’” United Labs., Inc. v. Kuykendall, 403 S.E.2d
104, 108 (N.C. Ct. App. 1991) (quoting Watson v. Storie, 300 S.E.2d 55, 58 (N.C.
1983)), aff’d on other grounds, 437 S.E.2d 374 (N.C. 1993); see also Sylva Shops Ltd.
P’ship v. Hibbard, 623 S.E.2d 785, 789–90 (N.C. Ct. App. 2006). Therefore, if North
6
The StraTech SOW states that “this document shall be governed by and construed
in accordance with the internal substantive and procedural laws of the State of North
Caroline without regard to conflict of law principles. (See Hoglund Dep., Ex. 22
“StraTech SOW” at PE_00320 [Doc. No. 41-1].)
7
The Datalink SOWs state that “[t]he validity, interpretation, enforceability, and
performance of this agreement shall be governed by and construed in accordance with the
law of the State of Minnesota without reference to provisions concerning conflicts of
law.” (See Rome Decl., Ex. S, “Datalink Terms and Conditions” § 14 [Doc. No. 50-1].)
22
Carolina law governs the issue of mitigation in this case, then Plaintiff may in fact have
had a duty to mitigate its damages.
Regardless of which state law applies to Plaintiff’s duty to mitigate damages, the
Court finds that Plaintiff sufficiently mitigated its damages, and no genuine issue of
material fact exists about whether, and to what extent, Datalink mitigated its damages.
Accordingly, the Court holds that a genuine issue of material fact does not exist
with respect to (1) the contract price for goods and services rendered, and (2) the
additional profit margin on software, training, and maintenance to which Plaintiff is
entitled. Therefore, the Court finds that Datalink is entitled to $402,868.23, the amount it
would have received had Perkins Eastman performed, not including the Symantec
software credit.
b. Late Charges
Plaintiff is additionally entitled to a late fee from Defendant. Regardless of which
SOW applies – the StraTech SOW that was initially incorporated into the Purchase
Order, or any of the Datalink SOWs – all of the SOWs include contractual provisions that
provide for a late fee if payment is delinquent. (See Hoglund Dep., Ex. 22, “StraTech
SOW” at PE_00319 (emphasis added) [Doc. No. 41-1]; Rome Decl., Ex. S, “Datalink
Terms and Conditions” § 3 [Doc. No. 50-1].)
A late fee provision in the Terms and Conditions in the StraTech SOW states that:
Undisputed invoices unpaid by Customer after thirty (30) days of the
invoice date will bear interest at the lower of either (a) the rate of one and
one-half percent (1.5%) per month calculated monthly or (b) highest rate
permitted by applicable law.
23
(See Hoglund Dep., Ex. 22, “StraTech SOW” at PE_00319 (emphasis added) [Doc. No.
41-1].) The SOW also states that “this document shall be governed by and construed in
accordance with the internal substantive and procedural laws of the State of North
Carolina without regard to conflict of law principles.” (See id. at PE_00320.)
Similarly, each version of the Datalink SOW incorporates Terms and Conditions
(see Rome Decl., Exs. G, H, I, J “Datalink SOWs” at 2 (Confidentiality Statement) [Doc.
No. 50-1]) that include a late fee provision, which states that “Datalink reserves the right
to charge a late payment charge not to exceed one and one-half percent (1.5%) per month
or the maximum amount permitted by law, whichever is less, on all invoices that remain
unpaid thirty (30) days from invoice due date.” (See Rome Decl., Ex. S, “Datalink Terms
and Conditions” § 3 [Doc. No. 50-1].) However, in contrast to the StraTech SOW, which
applies North Carolina law, the Terms and Conditions for the Datalink SOWs provide
that “[t]he validity, interpretation, enforceability, and performance of this agreement shall
be governed by and construed in accordance with the law of the State of Minnesota
without reference to provisions concerning conflicts of law.” (See id. § 14.)
Plaintiff claims that the StraTech SOW governs because it was incorporated into
the signed Purchase Order. (See Pl.’s Mem. at 15 [Doc. No. 40].) Plaintiff contends that
it is entitled to the 1.5% interest rate set out in the Terms and Conditions, but also argues
that, in the alternative, it is entitled to a prejudgment interest rate of 10% per year,
pursuant to Minnesota law. (See id. at 16 n.3.) However, Datalink fails to address
whether the choice of law provision in the StraTech SOW demonstrates that the relevant
comparison should be with North Carolina law, as opposed to Minnesota law. Moreover,
24
even applying the 1.5% interest rate, Datalink does not carefully lay out its calculation of
the ultimate damages award it believes Perkins Eastman must pay. Specifically, it is
unclear to the Court what portion of the total $402,868.23 sum began to accrue interest at
what time, since Datalink sent several invoices for goods and services rendered at
different times, and interest only begins accruing 30 days from the date the invoice is
due.
In contrast, Defendant argues that “[t]o the extent an SOW is applicable . . . the
most recent version of the unsigned SOWs applies.” (See Def.’s Mem. at 14 (emphasis
original) [Doc. No. 46].) However, Defendant provides no briefing on which interest rate
applies even if the most recent Datalink SOW governs – specifically, whether the 1.5%
interest rate applies, or whether the “maximum amount permitted by [Minnesota] law”
applies. Also, like Datalink, Perkins Eastman does not provide any calculations of the
ultimate damages award it believes Datalink is due, given the applicable late fee. 8
The Court orders further briefing about which SOW governs the parties’
contractual agreement. Specifically, the Court requires further briefing on whether the
parties mutually assented to the Datalink SOWs, and thus adequately modified the
StraTech SOW. In order for the parties to have formed an enforceable contract with
8
Insofar as Perkins Eastman argues that “there is no basis on this record to conclude
that Defendant agreed to [any of] the late charges or fees provisions” (see Def.’s Mem. at
9 [Doc. No. 46]), the Court disagrees. Lam signed the Purchase Order on behalf of
Perkins Eastman, and the Purchase Order expressly incorporated the StraTech SOW,
which included a late charge provision. Therefore, at the very least, Defendant clearly
agreed to the late fee provision in the StraTech SOW because it was encompassed by the
Purchase Order.
25
these subsequent SOW drafts, the parties must have objectively manifested mutual
assent. See Markmann v. H.A. Bruntjen Co., 81 N.W.2d 858, 862 (Minn. 1957)
(explaining that Minnesota law follows the objective theory of contract formation,
requiring an outward manifestation of assent); Cederstrand v. Lutheran Bhd., 117 N.W.2d
213, 221 (Minn. 1962) (explaining that “[e]xpressions of mutual assent, by words or
conduct, must be judged objectively, not subjectively.”)
Under the Minnesota statute of frauds, usually, a signed, written agreement must
exist to enforce the sale of goods valued over $500. See Minn. Stat. § 336.2-201(1)
(2015). However, a “contract” that is neither written nor signed, is still considered valid
and enforceable if the goods are specially manufactured for the buyer and not suitable for
sale to others in the ordinary course of business, or if the goods have been received and
accepted. See id. § 336.2-201(3). Here, the sale of goods is valued well over $500, but
the goods were specially configured for Perkins Eastman, and were received and
accepted by Defendant after they were delivered. (See supra Part III(B)(4)(a).)
Therefore, under the statute of frauds, if the Datalink SOWs were mutually assented to,
they may constitute “contracts” that qualify as exceptions to the written and signed
requirement, and thus may have legally modified the StraTech SOW.
Accordingly, the Court orders the parties to further brief: (1) which SOW governs
the contractual relationship at issue in this case; (2) which “applicable” state law controls
in this case for calculating late fees due under the contract; (3) which appropriate late fee
to apply (whether the 1.5% rate set out in the contract, or the “highest rate permitted by
applicable law”); and (4) the ultimate damages award that results from the applicable late
26
fee. The Court emphasizes that the parties must limit their briefing to these sub-issues for
the sole purpose of clarifying which late fee provision applies. The parties’ briefing must
not include arguments pertaining to a reconsideration of Defendant’s liability, or any
other issues that the Court has already decided in this Order.
c. Attorneys’ Fees
The Court also orders further briefing from the parties about how the governing
SOW affects the amount of attorneys’ fees Datalink is entitled. If the StraTech SOW
controls, then Datalink is entitled reasonable attorneys’ fees that resulted from Perkins
Eastman’s breach. (See Hoglund Dep., Ex. 22, “StraTech SOW” at PE_00319–320, ¶ D2
(stating that “Customer will . . .[pay] reasonable attorneys’ fees” . . . for “any breach of
Customer’s obligations hereunder”) [Doc. No. 41-1].) In contrast, if a Datalink SOW
governs, then the Terms and Conditions provide that Datalink is entitled to attorneys’
fees only if it prevails in arbitration. 9 (See Rome Decl., Ex. S, “Datalink Terms and
Conditions” § 10 [Doc. No. 50-1].)
Additionally, if the governing SOW permits Datalink to collect attorneys’ fees, the
Court also orders Plaintiff to submit briefing and an affidavit carefully documenting and
calculating reasonable attorneys’ fees it believes it is due under the terms of the contract.
Defendant will have an opportunity to respond to Datalink’s attorneys’ fees calculation.
Therefore, the parties’ briefing must also address how the controlling SOW affects the
amount of attorneys’ fees Datalink is entitled to collect, if any at all. The Court again
9
The Court expresses no opinion as to whether the attorneys’ fees provision in the
Datalink SOWs could be interpreted to apply to parties that prevail in court, as well as via
arbitration.
27
emphasizes, however, that the parties’ briefing must not engage with reconsideration on
the merits of Defendant’s liability. As the Court clearly held above, regardless of which
SOW applies, Defendant breached the contract between the parties.
5. Defendant’s Rescission Defense Fails
In opposition to Plaintiff’s breach of contract claim, Perkins Eastman argues that it
is entitled to the equitable remedy of rescission. (See Def.’s Mem. at 5–9 [Doc. No. 46].)
Specifically, Defendant contends that questions of material fact exist as to whether it
rescinded its agreement with Plaintiff. (See id. at 5.) “Rescission is an equitable remedy
which may be granted for a substantial breach of contract.” See Vill. of Wells v. LayneMinn. Co., 60 N.W.2d 621, 625 (1953). “The effect of the remedy of rescission is
generally to so extinguish a rescinded contract so effectively that in contemplation of law
it has never had existence.” Mead v. Mead, 974 F.2d 990, 992 (8th Cir. 1992) (quoting
Chase Manhattan Bank, N.A. v. Clusiau Sales and Rental, Inc., 308 N.W.2d 490, 494
(Minn. 1981)); see also Johnny’s, Inc. v. Njaka, 450 N.W.2d 166, 168 (Minn. Ct. App.
1990); Pioneer Indus., Inc. v. Hartford Fire Ins. Co., No. 07-cv-4421 (JNE/JJK), 2009
WL 2187379, at *12 (D. Minn. July 22, 2009).
According to the Minnesota Supreme Court, “[i]t is the general rule that a party
seeking rescission must as a condition precedent return or offer to return that which he
has received under the contract in order to restore the parties to the positions which they
occupied prior to the transaction.” See Vill. of Wells, 60 N.W.2d at 625. “Because the
law favors the enforcement of contracts, a right to rescind arises only in circumstances
28
that may fairly be described as ‘unusual.’” N.L.R.B. v. MEMC Elec. Materials, Inc., 363
F.3d 705, 709 (8th Cir. 2004).
Under Minnesota law, “[a] contract may be rescinded based on mutual mistake,
mutual assent to rescission, a unilateral mistake induced by the other party, or a unilateral
mistake where the contract can be rescinded without substantial hardship to the adverse
party.” Am. Litho, Inc. v. Imation Corp., No. 08-cv-5892 (JMR/SRN), 2010 WL
681275, at *3 (D. Minn. Feb. 23, 2010) (citing Gethsemane Lutheran Church v. Zacho,
104 N.W.2d 645, 649 (Minn. 1960); Lyon Financial Services, Inc. v. Hearyman, No.
A08–1795, 2009 WL 1515598, at *5 (Minn. Ct. App. June 2, 2009); Gfrerer v. Lemcke,
No. A08–0873, 2009 WL 749584, at *3 (Minn. Ct. App. March 24, 2009). “Generally, a
party’s own unilateral mistake is not a basis for rescission unless there is an ambiguity,
fraud or misrepresentation by the other party.” See Am. Litho, Inc., 2010 WL 681275, at
*3. Nonetheless, a court may utilize its equitable power to “rescind a contract for a
purely unilateral mistake of one contracting party not induced or contributed to by the
other.” See Gethsemane, 104 N.W.2d at 649.
However, the Minnesota Supreme Court explained in Gethsemane that “[r]elief
from contractual obligations on grounds of unilateral mistake alone has been granted only
[1] when enforcement would impose an oppressive burden on the one seeking rescission,
and [2] when rescission would impose no substantial hardship on the one seeking
enforcement.” See id.
In this case, Defendant seeks to rescind the contract pursuant to the doctrine of
unilateral mistake. Specifically, Perkins Eastman argues that Plaintiff should have
29
known that Lam did not have the actual or apparent authority to execute a contract on
behalf of Perkins Eastman. For the reasons set forth below, the Court finds that
Defendant’s rescission defense fails.
a. Because Plaintiff Substantially Performed, Parties Cannot Be
Placed in Pre-Contract Position
As the Court noted above, a principal goal of the rescission remedy is to place the
parties in a position that “they occupied prior to the transaction.” See Vill. of Wells, 60
N.W.2d at 625. However, if one party to a contract has already “performed a substantial
part” of its obligations and cannot be placed in its pre-performance position, “the other
party cannot rescind.” See id. (citing Hunter v. Holmes, 62 N.W. 1131, 1132 (Minn.
1895)).
Given that the predominant purpose of the contract between the parties was the
sale of goods (see supra Part III(B)(4)), Plaintiff substantially performed its obligations
under the contract by delivering all goods related to the NBU Project. (See Cockson
Decl., Ex. S, “Def.’s Resp. to Pl.’s Requests for Admission” at 3 [Doc. No. 41-19].)
Accordingly, Plaintiff asserts that as a “threshold matter, rescission is not available
because the parties cannot be returned to their pre-contract postures.” (Pl.’s Reply at 2
[Doc. No. 49].) Plaintiff correctly states that the record shows that Datalink cannot be
returned to its original position because the NBU hardware is “not fungible.” (See id.)
The hardware is “highly customized technology equipment that depreciates rapidly, and
Symantec has refused to take it back.” (See id.) John Sorensen, a Symantec employee,
informed Frank Giannelli, the General Manager of Datalink, that Symantec will not
30
refund the hardware. (See Rome Decl., Ex. D, “Sorensen Email” [Doc. No. 50-1].)
Moreover, Datalink is prohibited from reselling the hardware to anyone other than
Perkins Eastman pursuant to the express terms of its Symantec partnership agreement. 10
(See id., Ex. F, “Symantec Agreement” § 2.3(vi).) Therefore, because Datalink cannot
recoup the costs of purchasing and re-selling the Symantec equipment, it cannot be
returned to its original pre-contract position; and thus, the primary goal of the rescission
remedy would not be met.
The Court notes that although it does not appear that Datalink could be returned to
its original pre-contract position, the Minnesota Supreme Court has stated that the
substantial performance rule is “not inflexible and yields whenever under the
circumstances restitution is not essential to the complete administration of justice
between the parties.” See Vill. Of Wells, 60 N.W.2d at 625 (citing Darelius v.
Commonwealth Mortgage Co., 188 N.W. 208, 211 (Minn. 1922) (explaining that
“whenever, under the circumstances of the particular case, restitution by plaintiff is not
essential to the complete administration of justice between the parties, it will not be
required. The rule goes no farther than justice requires.”)). Therefore, the Court
considers Defendant’s other arguments about rescission below.
10
Even if Datalink could have resold the hardware, it is undisputed that the monthsold appliances had little or no value. (See Hoglund Dep. 74:11–75:8 [Doc. No. 41-1].)
In fact, Defendant independently confirmed that the hardware had little to no resale
value. Perkins Eastman President Hoglund testified in his deposition that the company
was told that “the parts were worth maybe 10 to 20% what we paid for [them].” (See id.
at 74:18–75:6.)
31
b. Lam’s Apparent Authority Negates Rescission Defense
Defendant contends that “[a] cursory review of the record reveals that Plaintiff
was on notice of the need to have someone other than Lam sign the purchase order.”
(See Def.’s Mem. at 6 (emphasis added) [Doc. No. 46].) However, a careful review of
the record reveals that even Defendant’s own President admitted that Lam had apparent
authority to execute the purchase orders. (See Hoglund Decl. at 123:7–23 [Doc. No. 411].)
Under Minnesota law, “a principal is bound not only by the agent’s actual
authority but also by that which the principal has apparently delegated to him.” McGee
v. Breezy Point Estates, 166 N.W.2d 81, 89 (Minn. 1969); see Chavez-Lavagnino v.
Motivation Educ. Training, Inc., 767 F.3d 744, 751 (8th Cir. 2014) (explaining that
“[a]pparent authority in an organizational setting may . . . arise from the fact that a person
occupies a type of position that customarily carries specific authority although the
organization has withheld such authority from that agent.”) (citations omitted)).
“Whether an agent is clothed with apparent authority is a question of fact.” Thesenga
Land Co. v. Cirrus Warehouse, Inc., No. C5-03-370, 2003 WL 22889499, at *2 (Minn.
Ct. App. Dec. 9, 2003) (citing Hagedorn v. Aid Ass’n for Lutherans, 211 N.W.2d 154,
157 (Minn. 1973)). Apparent authority exists if: (1) the principal “held the agent out as
having authority,” or “knowingly permitted the agent to act on its behalf;” (2) “third
parties . . . had actual knowledge that the agent was held out by the principal as having
such authority or had been permitted by the principal to act on its behalf;” and (3) “proof
of the agent[’]s apparent authority [is] found in the conduct of the principal, not the
32
agent.” Thesenga Land Co., 2003 WL 22889499, at *2 (citing Hockemeyer v. Pooler,
130 N.W.2d 367, 375 (Minn. 1964)).
Here, Defendant argues that a genuine issue of material fact exists as to the first
element of the apparent authority test outlined above – whether Perkins Eastman held out
Lam as having authority to execute the NBU Project contract. Plaintiff contends that
Perkins Eastman held Lam out as having authority by permitting Lam to negotiate the
contract and configuration details between the parties. Defendant points to one email,
which it believes serves as evidence to the contrary. Perkins Eastman argues that because
Lam sent an email in March 2013 – several months after the December 27, 2012
Purchase Order was executed – and implied, through the phrasing of one question, that an
agreement between the parties was not final, Plaintiff should have been on notice that
Defendant was uncertain if it would need the NBU project. (See Def.’s Mem. at 6 (citing
Lam email which stated, “if we proceed with Symantec NBU”) [Doc. No. 46].)
The Court finds that a single conditional precedent is not enough to create a
genuine issue of material fact about the finality of the agreement between the parties. On
September 25, 2012, Kim Lam stated that he was “doing all necessary steps required to
usher and secure a ‘green light’ to proceed, finance, and deploy[]” the NBU Project. (See
Hoglund Dep., Ex. 26 [Doc. No. 41-1].) On December 27, 2012, Lam delivered to
Datalink an executed, unqualified Purchase Order, stating, “please find this email as
approved.” (See id. at 123:5–7; Ex. 31; see also Rome Decl., Ex. R, “Purchase
Confirmation and Approval” [Doc. No. 50-1].)
The record also reflects that after December 2012, the parties continued to discuss
33
the details of how they intended to move forward with the NBU Project. (See Ho Decl,
Ex. A, “Datalink Project Kickoff Presentation” (two hour presentation for technical
kickoff meeting that took place on Feb. 14, 2013) [Doc. No. 15-1]; Hoglund Dep., Ex. 32
(Feb. 7, 2013 emails scheduling the technical kickoff meeting); Ex. 33 (Feb. 13, 2013
email confirming the kickoff meeting); Ex. 34 (Feb. 12, 2013 email from Alan Ho,
Systems Director at Perkins Eastman, to John Aiello, a Datalink Account Executive,
requesting “the latest Visio of the design [of the NBU Project];” and a Feb. 13, 2013
email from Aiello to Ho, in which Aiello attached a summary of the hardware and
software configuration for the NBU Project); Ex. 39 (March 18, 2013 email from
Anthony Lee, an employee in the Information Technology Department at Perkins
Eastman, informing Aiello that he completed a pre-site configuration questionnaire in
order to provide Datalink with detailed confirmation specifications) [Doc. No. 41-1].)
Therefore, Lam’s single inclusion of a condition precedent in one sentence in one
email exchange does not sufficiently demonstrate uncertainty about the definitiveness of
an agreement between the parties, nor does it substantiate a factual dispute about whether
Perkins Eastman held out Lam as having authority.
Defendant also argues that a genuine issue of fact exists as to the second element
of the Thesenga Land Co. apparent authority test – whether Plaintiff had actual
knowledge that Lam had apparent authority to execute contracts on behalf of Perkins
Eastman. See Thesenga Land Co., 2003 WL 22889499, at *2. Defendant contends that
because Aiello sent an internal email seeking information about the competitive
advantage of NBU as opposed to other options, Plaintiff knew or should have known that
34
the agreement between the parties was not final. (See Def.’s Mem. at 7 [Doc. No. 46].)
The Court disagrees, and finds that no genuine issue of material fact exists about whether
Plaintiff believed that Lam had the apparent authority to execute a final agreement
between the parties.
Defendant claims that “there would be no reason for Plaintiff to look for this
[competitive advantage] information” if Defendant had already formally purchased the
NBU system. (See Def.’s Mem. at 7 [Doc. No. 46].) In response, Plaintiff argues that
“the date and plain language of the emails belie that claim.” (See Pl.’s Reply at 5 [Doc.
No. 49].) The Court agrees with Plaintiff. First, Perkins Eastman was the entity that
requested this competitive information after Datalink already performed. In an email
sent on March 27, 2013, Lam asked Aiello for competitive information that would be
helpful for Perkins Eastman’s upcoming merger with another company that uses a
different technology system. (See Compl. at 64 [Doc. No. 1-1].) By this date, Perkins
Eastman had already accepted the appliances and Datalink had rendered thirty hours of
professional services. Furthermore, nothing in Lam’s email may fairly be read as putting
Datalink on notice of Perkins Eastman’s alleged unilateral mistake. As Plaintiff explains,
“[t]hat Perkins Eastman would seek comparative information about the technology of an
acquisition target is neither unusual nor alarming. The law does not charge Datalink with
decoding the hidden meaning of an otherwise routine email.” (See Pl.’s Reply at 5 [Doc.
No. 49].)
The Court also notes that Defendant argues that because it did not have the
opportunity to depose Aiello and ask him under oath whether he actually believed Lam
35
had apparent authority to negotiate on behalf of Perkins Eastman, a disputed issue of fact
remains. (See Def.’s Mem. at 7 [Doc. No. 46].) The Court disagrees. Defendant cannot
“rest upon mere allegation or denials of his pleading, but must set forth specific facts
showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256. Perkins
Eastman “must do more than simply show that there is some metaphysical doubt as to the
material facts, and must come forward with specific facts showing that there is a genuine
issue for trial.” Briscoe v. Cnty. of St. Louis, Mo., 690 F.3d 1004, 1011 (8th Cir. 2012)
(internal quotations and citations omitted); see also Gibson v. Am. Greetings Corp., 670
F.3d 844, 853 (8th Cir. 2012) (same). Here, Perkins Eastman merely rests on the
possibility that Aiello’s testimony under oath would contradict the substantial, existing
evidence in the record. Thus, Defendant fails to present specific facts showing a genuine
issue for trial.
Moreover, the Court notes that the President of Perkins Eastman admitted during
his deposition testimony that after receiving the signed December 27, 2012 Purchase
Order, Datalink likely “would not have expected that there was anything further” to
obtain by way of approvals. (See Hoglund Dep. 122:21–123:23 [Doc. No. 41-1].) In
other words, as Plaintiff explains, “Perkins Eastman agrees that it was reasonable for
Datalink to take Kim Lam at his word—that he did, in fact, take all of the ‘necessary
steps’ to obtain approval and, by December 27, 2012, had the authority to communicate
that approval.” (See Pl.’s Reply at 5 [Doc. No. 49].) Accordingly, the Court holds that
no genuine issue of material fact exists as to whether Lam had apparent authority to
36
execute a contract on behalf of Perkins Eastman. 11
c. Defendant Would Not Be Oppressively Burdened If Contract
Was Enforced; But Rescission Would Cause Plaintiff
Substantial Hardship
As noted above, in order for Perkins Eastman to succeed with its rescission
defense based on unilateral mistake, it must show the existence of two conditions. See
Gethsemane, 104 N.W.2d at 649. First, Defendant must demonstrate that enforcing the
contract “would impose an oppressive burden” on Perkins Eastman. See id.; see also
Am. Litho, Inc., 2010 WL 681275, at *3. Second, Defendant must show that rescission
would “impose no substantial hardship” on Datalink. See Gethsemane, 104 N.W.2d at
649; see Am Litho, Inc., 2010 WL 681275, at *3.
Defendant is silent on the subject of whether enforcing the contract would impose
an oppressive burden on Perkins Eastman. Therefore, Perkins Eastman fails to show the
first condition required to prove rescission on the basis of a unilateral mistake.
Similarly, Perkins Eastman also fails to show the second requisite condition – that
rescission would not impose substantial hardship on Datalink. In fact, the record
11
Plaintiff sufficiently presents evidence demonstrating the existence of the third,
and final, element of the apparent authority test outlined in Thesenga Land Co. For
instance, according to the record before the Court, proof of Lam’s apparent authority is
evident in the conduct of other Perkins Eastman employees, who were aware of Lam’s
negotiations and the contract deal and did not intervene. (See, e.g., Hoglund Dep. 14:13–
15:5, 19:1–10, 20–21, 54:3–13 (Lam would update Hoglund about the NBU Project); id.,
Ex. 33 (Feb. 13, 2013, email from Alan Ho, Senior Associate at Perkins Eastman, to
several Perkins Eastman employees confirming their availability for an NBU Project
meeting and informing them that that they will need “to start working on this
questionnaire after tomorrow’s meeting.”); Ex. 32 (Feb. 7, 2013, email from Aiello to
Alan Ho and others).) Defendant does not appear to argue that a genuine issue of
material fact exists for the third element of the apparent authority test. Therefore, the
Court finds that the factual basis supporting the existence of this element is not disputed.
37
overwhelmingly demonstrates that rescission would impose a substantial hardship on
Datalink. The undisputed record shows the following: Datalink paid Symantec for the
NBU Project equipment (see Westenfield Dep. 56:19 –57:1 [Doc. No. 50-1]); Perkins
Eastman has not paid Datalink for the equipment (see Def.’s Mem. at 5 [Doc. No. 46]);
the Datalink-Symantec agreement prohibits Datalink from reselling the hardware (Rome
Decl., Ex. F, “Symantec Agreement” § 2.3(vi) [Doc. No. 50-1]; Westenfield Dep. 100:4–
19 [Doc. No. 41-2]); Symantec would not refund the hardware (Rome Decl. Ex. D,
“Sorensen Email” [Doc. No. 50-1]); and the NBU Project hardware is worth – at most –
ten to twenty cents on the dollar (Hoglund Dep. 74:11–75:8 [Doc. No. 41-1]; Cockson
Decl., Ex. V, “Missling Correspondence” [Doc. No. 41-22]). Thus, the record establishes
that rescission would cause Datalink substantial hardship because it would remain
uncompensated for the goods it provided and services it rendered.
Defendant claims that “[t]he fact issue of whether Plaintiff sustained ‘substantial
hardship’ from a rescission is highlighted by the fact that Plaintiff was able to return
100% of the software it had sold to Defendant back to Symantec.” (See Def.’s Mem. at 8
[Doc. No. 46].) The Court disagrees. Simply because Symantec was willing to accept
the returned software does not indicate that Datalink did not suffer a loss of profit from
the software, or that Symantec is willing to accept returned hardware. In fact, the record
demonstrates the exact opposite. Symantec has affirmatively stated that it will not accept
the NBU hardware currently in Defendant’s possession. (See Rome Decl. Ex. D,
“Sorensen Email” [Doc. No. 50-1].) Therefore, it is undisputed that Datalink would
suffer substantial hardship if the Court permitted rescission.
38
Therefore, Defendant fails to meet the requisite standard of proof to survive
summary judgment with its rescission defense to Plaintiff’s breach of contract claim.
Accordingly, the Court grants Plaintiff’s motion with respect to Defendant’s liability for
Plaintiff’s Count I.
C. Count II: Unjust Enrichment
Because the Court finds that a binding contract existed between the parties, and
Defendant breached this contract, the Court need not reach the merits of Plaintiff’s unjust
enrichment claim.
IV.
ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED THAT:
1. Plaintiff’s Motion for Summary Judgment [Doc. No. 38] is GRANTED, in part,
consistent with this Order.
2. Solely in order to guide the Court’s analysis about which late fee applies to
Plaintiff’s damages, and the amount of attorneys’ fees Plaintiff is entitled, the
parties must submit briefing on the following issues: (1) which statement of
work (“SOW”) governs the contractual relationship at issue in this case – either
the StraTech SOW or one of the Datalink SOWs; (2) which “applicable” state
law controls in this case for calculating late fees due under the contract; (3)
which appropriate late fee to apply (whether the 1.5% rate set out in the
contract, or the “highest rate permitted by applicable law”); (4) the ultimate
damages award that results from the appropriately applied late fee; and (5)
attorneys’ fees due under the terms of the governing SOW.
a. Plaintiff must submit its briefing by or before two weeks from the date of this
Order.
b. Defendant must submit its response brief by or before three weeks from the
date of this Order.
Dated: June 8, 2015
s/Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge
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