Black Hills Molding, Inc. v. Brandom Holdings, LLC

Filing 60

ORDER denying 46 Motion for Summary Judgment. Signed by Chief Judge Jeffrey L. Viken on 9/8/15. (SB)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
CIV. 12-5051-JLV

BLACK HILLS MOLDING, INC.,
Plaintiff,

ORDER

vs.
BRANDOM HOLDINGS, LLC,
Defendant.
INTRODUCTION

Plaintiff Black Hills Molding, Inc., filed a complaint against the defendant
Brandom Holdings, LLC, in the Seventh Judicial Circuit Court for Pennington
County, South Dakota. (Docket 1-1). The complaint alleges breach of contract
and promissory estoppel against the defendant. Id. Brandom Holdings timely
filed a notice of removal pursuant to 28 U.S.C. §§ 1332 and 1446. Id.
Defendant denies plaintiff’s claims. (Docket 20). Pending before the court is
the defendant’s motion for summary judgment. (Docket 46). Plaintiff resists
defendant’s motion. (Docket 54). For the reasons stated below, defendant’s
motion for summary judgment is denied.
STANDARD OF REVIEW
Under Fed. R. Civ. P. 56(a), a movant is entitled to summary judgment if
the movant can “show 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).
Once the moving party meets its burden, the nonmoving party may not rest on

the allegations or denials in the pleadings, but rather must produce affirmative
evidence setting forth specific facts showing that a genuine issue of material fact
exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). Only
disputes over facts that might affect the outcome of the case under the governing
substantive law will properly preclude summary judgment. Id. at p. 248.
“[T]he mere existence of some alleged factual dispute between the parties will not
defeat an otherwise properly supported motion for summary judgment; the
requirement is that there be no genuine issue of material fact.” Id. at 247-48
(emphasis in original).
If a dispute about a material fact is genuine, that is, if the evidence is such
that a reasonable jury could return a verdict for the nonmoving party, then
summary judgment is not appropriate. Id. However, the moving party is
entitled to judgment as a matter of law if the nonmoving party failed to “make a
sufficient showing on an essential element of her case with respect to which she
has the burden of proof.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
In such a case, “there can be ‘no genuine issue as to any material fact,’ since a
complete failure of proof concerning an essential element of the
nonmoving party’s case necessarily renders all other facts immaterial.” Id. at
p. 323.
In determining whether summary judgment should issue, the facts and
inferences from those facts must be viewed in the light most favorable to the
nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
2

574, 587-88 (1986). The key inquiry is “whether the evidence presents a
sufficient disagreement to require submission to a jury or whether it is so
one-sided that one party must prevail as a matter of law.” Anderson, 477 U.S.
at pp. 251-52.
FACTUAL SUMMARY
The following recitation consists of the material facts developed from the
complaint (Docket 1-1), defendant’s answer (Docket 20), defendant’s statement
of undisputed material facts (Docket 48), plaintiff’s response to defendant’s
statement of undisputed material facts (Docket 53) and other evidence where
indicated. Where a statement of fact is admitted by the opposing party, the
court will only reference the initiating document. These facts are “viewed in the
light most favorable to the [plaintiff] opposing the motion.” Matsushita Elec.
Indus. Co., 475 U.S. at 587. The facts material to defendant’s motion for
summary judgment are as follows.
Black Hills Molding, Inc., (“BH Molding”) is a South Dakota corporation
operating in Rapid City, South Dakota. (Docket 1-1 ¶ 1). BH Molding is a
manufacturer of drawer and cabinetry components. (Docket 48 ¶ 2). BH
Molding had a business relationship with Brandom Southwest, Ltd., (“Brandom
Southwest”) under which plaintiff would import product from China and cut that
product to Brandom Southwest’s specifications. Id. ¶ 3.
On July 10, 2006, BH Molding and Brandom Southwest entered into a
Non-Circumvention and Sales Agreement (“Sales Agreement”). Id. ¶ 4. David
3

Mallams1 and Andy Collins2 signed the Sales Agreement on behalf of BH
Molding and Brandom Southwest, respectively. (Dockets 51-2 at p. 4; 52-6 at p.
13:10-14-3; 53 ¶ 16). Matt Collins, Andy’s son, was the purchasing manager for
Brandom Southwest. (Docket 53 ¶ 16).
The Sales Agreement provided that BH Molding would maintain six to eight
weeks’ worth of inventory in Rapid City to fill orders for Brandom Southwest.
(Docket 48 ¶ 5). The Sales Agreement imposed two obligations on Brandom
Southwest. Id. ¶ 6. First, the Sales Agreement prevented Brandom Southwest
from working directly with BH Molding’s overseas suppliers. Id. Second, the
Sales Agreement required Brandom Southwest to purchase any excess inventory
remaining at BH Molding upon termination of the business relationship with
plaintiff. Id. BH Molding required these commitments to protect the integrity
of its overseas supplier relationships and to mitigate any financial risk it might
be exposed to resulting from holding any excess inventory ordered from its
overseas suppliers on behalf of Brandom Southwest. Id. ¶ 7. The inventorypurchase provision was sufficiently important that BH Molding probably would
not have purchased inventory to hold for Brandom Southwest if it refused to sign
the Sales Agreement. Id. ¶ 8.
Following execution of the Sales Agreement in 2006, BH Molding began
stocking inventory in Rapid City to fill orders for Brandom Southwest. Id. ¶ 9.
1David
2Andy

Mallams was the sales manager for BH Molding. (Docket 9-1 ¶ 1).
Collins was a principal in Brandom Southwest. (Docket 48 ¶ 19).
4

At the end of 2006, BH Molding held only a “pretty small amount” of inventory for
Brandom Southwest. Id. ¶ 10. In 2007, BH Molding relied on usage
projections from Brandom Southwest to order inventory to hold for filling
Brandom Southwest’s orders. Id. ¶ 11. The same projections and inventory
system was used in 2008. Id. ¶ 12. By the end of 2008, the inventory held by
BH Molding increased from the levels held in 2007. Id. ¶ 13. The inventory
held by BH Molding to fill Brandom Southwest’s orders reached its peak on
August 10, 2009, totaling $304,617.18.3 Id. ¶ 14.
Brandom Holdings, LLC, (“Brandom Holdings”) was organized under Texas
law on September 30, 2008. Id. ¶ 15. On October 1, 2008, Brandom Holdings
entered into an Asset Purchase Agreement with Brandom Southwest and its
owners, David Capps, Andy Collins, and Brandom Manufacturing of Texas, Inc.
Id. ¶ 19. By the terms of the Asset Purchase Agreement, Brandom Holdings
acquired certain assets and assumed certain defined contractual obligations of
Brandom Southwest.4 Id. ¶¶ 20 & 21. The Sales Agreement between BH
Molding and Brandom Southwest was not listed in the contractual obligations
assumed by Brandom Holdings. Id. ¶ 23.

3Plaintiff

objected to this statement to the extent defendant asserted this
inventory was held for Brandom Southwest, because Brandom Southwest
ceased to exist in September 2008. (Docket 53 ¶ 14) (referencing Docket 52-7 at
p. 5). Plaintiff does not object to the remainder of the statement.
4Plaintiff’s

objection to this statement relates not to the legal implications,
but rather to subsequent communications which plaintiff claims impacted the
actual effect of the acquisition by Brandom Holdings. (Docket 53 ¶ 21).
5

Andy Collins was a principal member of Brandom Holdings. (Docket 53
¶ 16). Matt Collins remained as the purchasing manager for Brandom
Holdings. Id. Brandom Southwest had been doing business as “Brandom
Cabinets” and that business name was acquired by Brandom Holdings. (Docket
52-7 at p. 9). Brandom Holdings continued to do business as “Brandom
Cabinets.” (Docket 52-1 at p. 1). Brandom Holdings continued using the
e-mail address for its employees previously used by Brandom Southwest ending
in “@brandom.com.” (Compare Dockets 51-2 at p. 5; 52-8; 52-4; 52-5 & 52-2)
(chronologically). Brandom Southwest and Brandom Holdings had the same
physical address: 404 Hawkins Street, Hillsboro, TX 76645. (Dockets 52-1 at p.
1; 53 ¶ 16). Both companies used the same toll free telephone number:
800-336-8001. (Dockets 51-2 at p. 3; 52-2 at p. 1; 53 ¶ 16). Inventory parts
numbers were the same for Brandom Southwest and Brandom Holdings.
(Docket 53 ¶ 16).
In the fall of 2009, David Mallams spoke with Matt Collins regarding the
ownership change between Brandom Southwest and Brandom Holdings.
(Docket 53 ¶ 25). As the purchasing manager for both Brandom Southwest and
Brandom Holdings, Matt Collins was responsible for hundreds of thousands of
dollars in lumber both companies needed to conduct their business. Id. Matt
Collins told David Mallams that even though Brandom Southwest had been
purchased by another company, BH Molding need not worry as it was still

6

“business as usual.” (Docket 53 ¶ 16) (referencing Docket 52-6 at pp.
33:4-34:24).
After David Harvick became the purchasing manager for Brandom
Holdings, he and Gary Mallams5 discussed the Sales Agreement. (Docket 53
¶ 34) (referencing Docket 52-9 at p. 25:3-17). Gary Hallams told him about the
Sales Agreement and that BH Molding “relied on Brandom Holdings to honor
that agreement because we were told that business would be going on as usual.”
(Docket 52-9 at p. 25:17-20). Mr. Harvick asked that a copy of the Sales
Agreement be faxed to Lena, an employee in accounting or some other office of
Brandom Holdings. Id. at p. 26:5-22. A BH Molding secretary faxed the
document. Id. at p. 26:10-22.
Later in the winter of 2009, Gary Mallams spoke with Joe Parziale who
replaced Mr. Harvick in the purchasing department. (Docket 53 ¶ 38)
(referencing Docket 52-9 at p. 29:11-12). During their conversation, Mr.
Parziale said he was aware of the Sales Agreement. (Docket 52-9 at p. 29:6-10).
They discussed the portion of the Sales Agreement which made Brandom
Holdings “responsible for the inventory if they quit taking it.” Id. at p. 28:6-10.
Because Mr. Parziale felt he was going to be responsible for the inventory in the
Sales Agreement, he was “going to do the ordering.” Id. at p. 27:14-25. They
had another conversation in early 2010 in which Mr. Parziale said he should be

5Gary

Mallams was the President of BH Molding. (Docket 48 ¶ 53).
7

managing the inventory held by BH Molding because Brandom Holdings was
“responsible” for that inventory. (Docket 48 ¶ 38).
Beginning in 2010, Brandom Holdings began working with BH Molding to
reduce the inventory previously stocked to fill orders for Brandom Southwest.
Id. ¶ 43. Some of that inventory was ordered in October 2009 after Brandom
Holdings entered the picture. (Docket 53 ¶ 43). To prove this point BH
Molding submitted a photograph of a shipping label dated October 27, 2009,
shipping 900 pieces of part “BR14707.”6 (Docket 52-3). Also in 2010,
Brandom Holdings began issuing specific instructions to BH Molding as to what
inventory should be purchased. (Docket 48 ¶ 45). The merchandise was
prepared to Brandom Holdings’ specifications and was not available for sale to
anyone else due to those specific dimensions. (Docket 53 at ¶ 45).
David Mallams had two conversations with Phyllis Brennan in the spring
or summer of 2011. Id. ¶ 40. Ms. Brennan had replaced Mr. Parziale in the
purchasing department of Brandom Holdings. Id. David Mallams told Ms.

6Defendant

objects to Exhibit 3 as an unauthenticated photograph
without proper foundation. (Docket 57 ¶ 43 (reply)). Exhibit 3 is identified in
the affidavit of Gregory Sperlich as “a true and correct copy of a shipping label
from existing Black Hills Molding stock which is the subject of this lawsuit
indicating this product was shipped from the factory on October 27, 2009.”
(Docket 52 ¶ 5). There are numerous references to fourteen thousand series
invoice items documented in this case. (Dockets 52-1; 52-2 at pp. 1-2 & 5; 52-4
at pp. 2 & 9; 52-8 at pp. 3-5; and 51-11). Invoice item 14707 is one of the items
in plaintiff’s final invoice to Brandom Holdings dated March 1, 2012. (Docket
51-11 at p. 1). For summary judgment purposes defendant’s objection is
overruled.
8

Brennan that Brandom Holdings was obligated to purchase the excess inventory
which BH Molding had on hand. Id. On August 19, 2011, Ms. Brennan
e-mailed David Mallams asking: “Please send me documentation of Brandom’s
agreements to order containers and pay for cutting/refinishing charges over and
above the price quoted.” (Docket 52-2 at pp. 2-3).7 In an August 22, 2011,
e-mail to Ms. Brennan, David Mallams wrote:
The container orders being taken over by Brandom occurred
when Joe came in and happened about May of 2010. We
discussed our inventory mess here due to in accurate [sic]
usage numbers. Joe made the decision that since Brandom
was responsible for the inventory we had here that he should
be making the decisions as to what we are going to order in
future containers.
(Docket 52-2 at pp. 2-3). Included in David Mallams’ e-mail was John Huff, a
consultant and later Vice President of Operations for Brandom Holdings.8 Id.;
see also Docket 50 ¶ 3.
The last inventory acquisition by BH Molding, based on Brandom
Holdings’ purchase order, was in the spring of 2011. (Docket 48 ¶ 46). By
March 2012, Brandom Holdings ceased purchasing cabinetry components from
BH Molding. Id. ¶ 47. As a result of efforts by Brandom Holdings to manage

7Pages

2 and 3 of Docket 52-2 are reversed in CM/ECF. Only by reversing
the pages and then examining the dates and times of e-mail exchanges do these
pages make sense. Compare Docket 52-2 at p. 7.
8This

appears to be in conflict with Mr. Huff’s sworn statement that
Brandom Holdings “was unaware of any contractual obligation . . . to purchase
excess inventory held by Black Hills Molding.” (Docket 50 ¶ 8).
9

the inventory at BH Molding, the amount of inventory decreased from its 2009
peak of $304,617.18 to $77,147.35 in March 2012. Id. ¶ 44.
On March 13, 2012, David Mallams contacted Brandom Holdings
demanding that it honor the terms of the Sales Agreement. (Docket 53 ¶ 48).
In an e-mail of that same date, BH Molding referenced the existence of a “signed
legal contract” obligating Brandom Holdings to “take all the material we [BH
Molding] had left.” (Docket 48 ¶ 49). In response, Brandom Holdings claimed
it was unaware of the existence of the Sales Agreement and denied any obligation
to purchase the inventory held by BH Molding. (Docket 53 ¶¶ 51-52).
Gary Mallams testified that had BH Molding learned in the late summer of
2009 that Brandom Holdings would not honor the Sales Agreement, plaintiff
would have stopped doing business with the defendant and filed a lawsuit to
recover the approximately $300,000 in inventory on hand at that time.
(Dockets 48 ¶ 53; 53 ¶ 53). David Mallams testified that it was impossible to
identify when the inventory was purchased and whether it was purchased based
on statements made by employees of Brandom Southwest or Brandom Holdings,
although some of the inventory can be traced to Brandom Holdings. (Dockets
48 ¶ 58; 53 ¶ 58).
DISCUSSION
Plaintiff alleges breach of contract and promissory estoppel against the
defendant. (Docket 1-1). BH Molding is a South Dakota corporation and
Brandom Holdings is a Texas limited liability company. Id. ¶¶ 1-2. The court
10

previously determined it had jurisdiction pursuant to 28 U.S.C. § 1332. (Docket
18 at p. 1) (adopting the report and recommendation of United States Magistrate
Judge Veronica L. Duffy dated November 5, 2012 (Docket 12) (citing 28 U.S.C.
§ 1332).
Brandom Holdings’ motion for summary judgment asserts it is entitled to
judgment as a matter of law on both of plaintiff’s claims. (Docket 47). Plaintiff
resists defendant’s motion for summary judgment. (Docket 55). Defendant’s
motion for summary judgment challenging each claim will be separately
addressed.
BREACH OF CONTRACT
BH Molding’s breach of contract claim asserts Brandom Holdings is liable
under the terms of the Sales Agreement. Plaintiff claims “Brandom Holdings,
LLC, and its predecessor, Brandom Southwest, entered into a contract in the
state of South Dakota with Black Hills Molding, Inc., for the purpose of
purchasing inventory to Brandom specification and further in house fabrication
of drawer components.” (Docket 1-1 ¶ 3). Plaintiff alleges it suffered damages
of “$77,147.35 plus interest and accruing storage fees.” Id. ¶ 32.
Brandom Holdings advances two arguments: first, it was not a signatory to
the Sales Agreement; and second, the Sales Agreement was not included in the
liabilities Brandom Holdings assumed at the time of the purchase of the assets of
Brandom Southwest. (Docket 47 at p. 10). For these reasons, Brandom

11

Holdings asserts it “cannot, as a matter of law, be liable to Black Hills [Molding].”
Id. at p. 13.
BH Molding counters that Brandom Southwest and Brandom Holdings
“continued on with the same principles, in the same line of business, with the
same name. . . . They did not inform their supplier, Black Hills Molding, of the
sale. . . . There was an unbroken line of business between Brandom Southwest
and Brandom Holdings” making Brandom Holdings liable under the Sales
Agreement. (Docket 55 at p. 7). Plaintiff asks the court to apply the “mere
continuation theory” and find that Brandom Holdings is the “same company”
and “should not be able to disclaim liability here.” Id. at p. 11.
The defendant acknowledges South Dakota recognizes the “mere
continuation theory” under certain circumstances, but that “Texas law has an
absolute bar on successor liability under . . . the ‘mere continuation’ theory.”
(Docket 56 at p. 7). Because of this conflict, defendant argues the court should
do a choice of law analysis. Id. Once the choice of law analysis is conducted,
Brandom Holdings argues the court must apply Texas law and find defendant is
not liable to BH Molding on the breach of contract claim. Id. at p. 11.
The defendant acknowledges that in a diversity case the court applies the
law of the forum state. Id. at pp. 7-8 (referencing Simpson v. Liberty Mutual
Insurance Co., 28 F.3d 763, 764 (8th Cir. 1994) (“Federal district courts must
apply the choice-of-law rules of the state in which they sit when jurisdiction is

12

based on diversity of citizenship.”) (citation omitted). Brandom Holdings admits
Simpson requires the court to apply South Dakota’s choice of law rules. Id.
Brandom Holdings argues SDCL § 53-1-4 compels the court to apply
“Texas law . . . to the question of what successor liability Brandom Holdings’
retained as the result of its Asset Purchase Agreement with Black Hills
Molding.”9 (Docket 56 at p. 8). SDCL § 53-1-4 states: “A contract is to be
interpreted according to the law and usage of the place where it is to be
performed or, if it does not indicate a place of performance, according to the law
and usage of the place where it is made.”
The Asset Purchase Agreement executed by Brandom Southwest and
Brandom Holdings expressly provided that it was to be governed by Texas law.
(Docket 51-8 ¶ 8.6). Texas law provides:
(a) A disposition of all or part of the property of a domestic
entity . . . is not a merger or conversion for any purpose.
(b) Except as otherwise expressly provided by another statute,
a person acquiring property described by this section may
not be held responsible or liable for a liability or obligation
of the transferring domestic entity that is not expressly
assumed by the person.
TEX. BUS.ORGS. CODE ANN. § 10.254 (Vernon). “Texas courts have
interpreted article 5.10 [the predecessor statute to § 10.254] as expressly
abrogating the mere continuation doctrine as a means of imposing successor

9To

be clear, the Asset Purchase Agreement exists between Brandom
Southwest and Brandom Holdings and there is no written contract between
Brandom Holdings and BH Molding.
13

liability.” E-Quest Management, LLC v. Shaw, 433 S.W.3d 18, 24 (Tex. App.
2013). “Texas law authorizes a successor to acquire the assets of a corporation
without incurring any of the grantor corporation’s liabilities unless the successor
expressly assumes those liabilities.” Id. The court agrees Texas expressly
abrogated the “mere continuation theory.”
If Texas law applies, it is clear that under the Asset Purchase Agreement
Brandom Holdings did not assume responsibility for the debt of Brandom
Southwest with BH Molding. The question remains under Texas law whether
Brandom Holdings “expressly assumed”10 the liability of Brandom Southwest by
its subsequent communications and actions with BH Molding. For the reasons
stated below, the application of Texas law need not be resolved.
It is the contractual arrangement between BH Molding and Brandom
Holdings which must be examined under SDCL § 53-1-4. While Brandom
Holdings may argue its contract with BH Molding should be examined under
Texas law, the facts require a different conclusion. BH Molding was not a party
to the Asset Purchase Agreement and was not aware of its existence.
Even without application of the Sales Agreement between BH Molding and
Brandom Southwest, it is undisputed Brandom Holdings contracted to purchase
cabinetry components in South Dakota and to have the inventory delivered to

10“Expressly”

is defined as “[i]n direct or plain terms; clearly, explicitly,
definitely.” Oxford English Dictionary, Oxford University Press, on-line ed.,
2015. “Expressed” is defined as “[d]eclared in direct terms; stated in words; not
left to inference or implication.” Black’s Law Dictionary 661 (9th ed. 2009).
14

and stored at BH Molding’s Rapid City, South Dakota, facility. The relationship
of the parties must be interpreted according to the law of South Dakota as the
place where the contract was to be performed. SDCL § 53-1-4. Whether the
Sales Agreement was part of the contractual arrangement between BH Molding
and Brandom Holdings is a question which must be resolved under South
Dakota law.
The defendant acknowledges that South Dakota recognizes the “mere
continuation theory.” (Docket 56 at p. 7). “The general rule is that a
corporation which purchases the assets of another corporation does not succeed
to the liabilities of the selling corporation.” Hamaker v. Kenwel-Jackson
Machine, Inc., 387 N.W.2d 515, 518 (S.D. 1986). “There are, however, four
exceptions to the general rule under which liability may be imposed on a
purchasing corporation.” Id. Those exceptions are:
(1)

when the purchasing corporation expressly or impliedly
agrees to assume the selling corporation’s liability;

(2)

when the transaction amounts to a consolidation or
merger of the purchaser and seller corporations;

(3)

when the purchaser corporation is
continuation of the seller corporation; or

(4)

when the transaction is entered into fraudulently to
escape liability for such obligations.

merely

a

Id. (citation omitted). The two exceptions articulated in Hamaker which may
apply to this case are: whether Brandom Holdings “expressly or impliedly” agreed

15

to assume Brandom Southwest’s obligations to BH Molding; and whether
Brandom Holdings “is merely a continuation” of Brandom Southwest. Id.
As discussed above, the “expressly agreed” exception is the same issue
which would be resolved if Texas law applied. On the other hand, whether
Brandom Holdings “impliedly agreed” to assume Brandom Southwest’s
obligation or is “merely a continuation of” Brandom Southwest so as to make
defendant liable are issues which must be resolved under South Dakota law.
“The key element of a ‘continuation’ is a commonality of the officers,
directors, and stockholders in the predecessor and successor corporations.” Id.
The South Dakota Supreme Court also recognized “that cash consideration was
sufficient to establish a prima facie case of continuation of a successor
corporation’s responsibility for products liability . . . .” Id. Those cash
consideration factors are:
(1)

There was basic continuity of the enterprise of the seller
corporation, including, apparently, a retention of key
personnel, assets, general business operations, and the
corporate name.

(2)

The seller corporation ceased ordinary business
operations, liquidated, and dissolved soon after
distribution of consideration received from the buying
corporation.

(3)

The purchasing corporation assumed those liabilities
and obligations of the seller ordinarily necessary for the
continuation of the normal business operations of the
seller corporation.

(4)

The purchasing corporation held itself out to the world
as the effective continuation of the seller corporation.
16

Id. at p. 519; see also Parker v. Western Dakota Insurers, Inc., 605 N.W.2d 181,
184 (S.D. 2000) (citing the Hamaker factors).
BH Molding argues Andy Collins was a shareholder in both Brandom
Southwest and Brandom Holdings and that his son Matt was the purchase
manager for both companies. (Docket 55 at p. 7). In addition, BH Molding
argues the two companies “continued on with the same principles, in the same
line of business, with the same name . . . . There was an unbroken line of
business between Brandom Southwest and Brandom Holdings . . . .” Id. For
summary judgment purposes, Brandom Southwest quit doing business while
Brandom Holdings continued doing business as “Brandom Cabinets” at the
same address, with the same toll-free telephone number and using the same
product invoice numbers.
Whether Brandom Holdings expressly or impliedly contracted with BH
Molding to assume the debt due from Brandom Southwest or whether Brandom
Holdings is a mere continuation of Brandom Southwest requires resolution of
material factual disputes which cannot be resolved at the summary judgment
stage. Those issues are jury questions for resolution at trial. Defendant’s
motion for summary judgment on plaintiff’s breach of contract claim is denied.

17

PROMISSORY ESTOPPEL11
“Promissory estoppel may be invoked where a promise alters his position
to his detriment in the reasonable belief that a promise would be performed.”
Garrett v. BankWest, Inc., 459 N.W.2d 833, 848 (S.D. 1990). In order to prevail
on a promissory estoppel claim, plaintiff must show the following:
1. The detriment suffered in reliance must be substantial in
an economic sense;
2. The loss to the promisee must have been foreseeable by the
promisor; and
3. The promisee must have acted reasonably in justifiable
reliance on the promise made.
Id. “Estoppel is not applicable if any of these elements are lacking or have not
been proven by clear and convincing evidence.” Hahne v. Burr, 705 N.W.2d
867, 873 (S.D. 2005). “Estoppel depends on the facts of each case and
ordinarily presents a question for the jury. . . . When the exact nature of the
representations and the reasonableness of the reliance upon them are disputed,
the issue of estoppel should be presented to a fact finder. . . . In addition,
summary judgment is not proper where a state of mind is involved.” Garrett,
459 N.W.2d at 848.
The parties agree plaintiff’s promissory estoppel claim is predicated on the
existence of a promise by Brandom Holdings that it would honor the obligations
of Brandom Southwest in the Sales Agreement. (Dockets 55 at p. 13; 56 at p.

11Brandom

Holdings acknowledges that South Dakota law applies to
plaintiff’s promissory estoppel claim. (Docket 56 at p. 8 n.4).
18

12). Defendant argues neither it nor any of its representatives expressly made a
promise to be responsible for Brandom Southwest debts to plaintiff under the
Sales Agreement. (Docket 56 at pp. 12-13). Because no promise was ever
made, defendant argues there is no basis for a promissory estoppel claim. Id. at
p. 13.
Defendant acknowledges “Andy Collins,12 a purchasing manager for
Brandom Southwest who continued in that position as an employee of Brandom
Holdings for several months . . . told [David] Mallams that: (1) there had been an
‘ownership change’ at Brandom Southwest and (2) as to [BH Molding] ‘business
would continue as usual.’ ” Id. Yet, defendant argues the latter statement
“was made in a vacuum and without any reference to any kind of the specific
contractual obligations owed by Brandom Southwest . . . .” Id. at pp. 13-14.
Plaintiff disputes this categorization since Matt Collins was the purchasing
manager who “understood the course of performance between [BH Molding and
Brandom Southwest]” and had “dealt with David Mallams for a number of years
and would know David would understand [the statement] to mean Black Hills
Molding[] would continue to purchase inventory from China, have it shipped to
Black Hill’s warehouse, have [the inventory] dove tailed to Brandom’s
specifications, and store the inventory until Brandom needed it.” (Docket 55 at
p. 12).

12The

court presumes that “Andy Collins” is a typographical error because
it was Matt Collins, Andy’s son, who was the purchasing manager for Brandom
Southwest. (Docket 53 ¶ 16).
19

Defendant claims that when David Harvick asked “for a copy of the
‘purchasing commitment’ from Brandom Holdings” and Gary Mallams had the
Sales Agreement faxed to Brandom Holdings, this process cannot be “construed
as a promise of any kind.” (Docket 56 at p. 14). Defendant argues Mr.
Harvick’s action was just “simply a request” and not part of a promise to obligate
Brandom Holdings. Id.
Defendant’s third objection is the plaintiff’s focus on a statement made by
Mr. Parziale, a later purchasing agent for Brandom Holdings, when he said “he
understood Brandom Holdings to be ‘responsible’ for the inventory” with BH
Molding. Id. at pp. 14-15. Again, defendant argues “this statement was made
in a vacuum, and without any discussion of, reference to, or even mention of any
obligation of Brandom Holdings to purchase excess inventory remaining at Black
Hills should the relationship between the two companies end.” Id. at p. 15.
When Gary Mallams spoke with Mr. Parziale in the winter of 2009 Parziale
acknowledged being aware of the Sales Agreement. (Docket 52-9 at p. 29:6-10).
They discussed the portion of the Sales Agreement which made Brandom
Holdings “responsible for the inventory if they quit taking it.” Id. at p. 28:6-10.
Because Mr. Parziale felt he was going to be responsible for the inventory in the
Sales Agreement he was “going to do the ordering.” Id. at p. 27: 14-25. In their
2010 discussion, Mr. Mallams was told Mr. Parziale would be managing the
inventory held by BH Molding because Brandom Holdings was “responsible” for
that inventory. (Docket 48 ¶ 38).

20

Finally, defendant objects to the court considering a conversation between
David Mallams and Ms. Brennan. (Docket 56 at p. 15). Defendant asserts Mr.
Mallams simply said to Ms. Brennan that Brandom Holdings was responsible for
purchasing the excess inventory held by BH Molding. Id. This statement is
incomplete. For summary judgment analysis it must be remembered that on
August 19, 2011, Ms. Brennan e-mailed Mr. Mallams asking “Please send me
documentation of Brandom’s agreements to order containers and pay for
cutting/refinishing charges over and above the price quoted.” (Docket 52-2 at
pp. 2-3). Those materials were sent to her attention and there was no denial of
the obligation by Brandom Holdings.
A jury question exists whether the declarations of defendant’s employees,
either individually or jointly, and the state of mind of the employees of both
Brandom Holdings and BH Molding, created an enforceable promise. Garrett,
459 N.W.2d at 848.
Defendant argues that even if there was an “actionable promise” it was
unreasonable for BH Molding to rely on the promise. (Docket 56 at p. 16).
Defendant claims the promise would be “vague, uncertain, and unsettled.” Id.
For summary judgment analysis, if a jury finds a promise was made, the
obligation created by the promise was clear. If BH Molding did business with
Brandom Holdings, the defendant would be responsible for the inventory held at
Rapid City. Brandom Holdings drew down the inventory with numerous orders
and purchases from 2009 through 2012 and its purchasing managers were
watching the inventory reports to control the inventory on hand at BH Molding.
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Because BH Molding realized an economic benefit of approximately
$223,000 by the draw down on inventory, Brandom Holdings argues the
remaining $77,000 inventory cannot be perceived as a detriment to plaintiff.
(Docket 56 at p. 2). Defendant argues that even if BH Molding demonstrates “an
actionable promise . . . it can never demonstrate any economic injury from that
reliance, much less a substantial economic injury.” Id. at p. 20. Defendant’s
argument is without merit. Whether BH Molding is entitled to recover $77,000
or whether Brandom Holdings is the good guy who saved the plaintiff $223,000
during their relationship is a jury question.
Finally, defendant argues BH Molding cannot prove which part of the
remaining inventory was acquired while Brandom Southwest was in place and
which part was ordered to fill Brandom Holdings’ orders. Id. at p. 22.
Defendant’s argument presumes it is not obligated under the Sales Agreement.
Because that obligation, if any, remains a jury question, defendant’s argument is
without merit.
ORDER
Based on the above analysis, it is
ORDERED that defendant’s motion for summary judgment (Docket 46) is
denied.
Dated September 8, 2015.
BY THE COURT:
/s/ Jeffrey L. Viken
JEFFREY L. VIKEN
CHIEF JUDGE
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