Barnco Intern., Inc. v. Arkla, Inc.

628 So. 2d 162, 1993 La. App. LEXIS 3675, 1993 WL 492510
CourtLouisiana Court of Appeal
DecidedDecember 1, 1993
Docket25,167-CA
StatusPublished
Cited by5 cases

This text of 628 So. 2d 162 (Barnco Intern., Inc. v. Arkla, Inc.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Barnco Intern., Inc. v. Arkla, Inc., 628 So. 2d 162, 1993 La. App. LEXIS 3675, 1993 WL 492510 (La. Ct. App. 1993).

Opinion

628 So.2d 162 (1993)

BARNCO INTERNATIONAL, INC., Plaintiff-Appellant,
v.
ARKLA, INC., Defendant-Appellee.

No. 25,167-CA.

Court of Appeal of Louisiana, Second Circuit.

December 1, 1993.
Rehearing Denied January 13, 1994.

*163 Weiner, Weiss, Madison & Howell by James Fleet Howell, R. Joseph Naus, Shreveport, for plaintiff-appellant.

Blanchard, Walker, O'Quin & Roberts by James C. McMichael, Jr., Don Weir, Jr., David N. Matlock, Shreveport, for defendant-appellee.

Before NORRIS, LINDSAY and VICTORY, JJ.

VICTORY, Judge.

Plaintiffs/Appellants, Barnco International, Inc. ("Barnco"), James D. Barnes and Johnette Q. Barnes ("Barnes"), brought a breach *164 of contract action against the defendants, Arkla, Inc. ("Arkla") and Arkla Chemical Corporation ("ACC"). The defendants moved for partial summary judgment, which was granted in part by the trial court. We reverse and deny the motion.

FACTS

James D. Barnes and Johnette Q. Barnes are the sole owners of United States patent number 4,730,118 entitled "Oil Field Induction Generator System," dated March 8, 1988. An Induction Generator System ("In-Gen System") is an engineered induction generator unit that converts natural gas or other similar fuels into electricity, hopefully in a cost effective manner. The Barnes are also the sole shareholders of Barnco International, Inc. Pursuant to a licensing agreement with the Barnes, Barnco has the exclusive right to manufacture and sell the In-Gen Systems.

In 1982, Barnco decided to develop, market and patent the In-Gen System. After expending large sums of money in this effort, it realized that it did not possess the necessary funds and expertise to fully market and sell the product. Thus, in 1989, Barnco entered into contract negotiations with Arkla to market and sell the In-Gen Systems.

As a result of these negotiations, ACC, a wholly owned subsidiary of Arkla, Inc., and Barnco entered into a "Distributorship Agreement" (the "Agreement"), dated January 23, 1990. The Agreement gave ACC the exclusive right to sell and distribute the In-Gen Systems for a share in the profits derived. Under the Agreement, ACC agreed to purchase a minimum number of In-Gen Systems from Barnco during certain prescribed time periods. Agreement, Section III ¶ 3.01. If ACC did not purchase the minimum number of In-Gen Systems for a given time period, it could preserve its exclusive rights status by maintaining, during the next time interval, an adequate number of sales representatives, that were actively engaged in selling In-Gen Systems. Agreement, Section III ¶ 3.02. If ACC failed to purchase the minimum number of In-Gen Systems and also failed to maintain an adequate sales force during the prescribed time interval, Barnco had the option of converting ACC's exclusive distributorship rights under the Agreement to nonexclusive. Agreement, Section III ¶ 3.02.

Paragraph 11.01 of the Agreement also provided, in pertinent part, that:

In the event of a material breach of this Agreement, except for failure to make payments hereunder, the party desiring to terminate the Agreement shall serve written notice of such breach on the other and the party who has breached the Agreement shall have thirty (30) days following such notice to correct or remedy such breach. Failure to make payments as provided hereunder shall result in immediate termination of this Agreement.

Within a few months after the contract was signed and continuing until the contract was terminated, Barnco expressed dissatisfaction with the manner in which ACC was performing, claiming failure to exercise diligence in good faith in promoting and distributing the In-Gen Systems per the Agreement. Several meetings between Arkla/ACC officials and Barnco over the 18-month period ending in May 1991 failed to resolve their differences.

Finally, by letter dated May 31, 1991, Barnco notified ACC that the Agreement had terminated because ACC had failed to pay the balance claimed to be due for three In-Gen Systems it had agreed to purchase in the spring of 1991. Barnco's letter cited the failure-to-pay termination provision contained in paragraph 11.01 of the Agreement, specifically reserving its right to recover damages caused by ACC's alleged failure to perform under the Agreement.

On July 19, 1991, plaintiffs filed this suit against ACC and Arkla. In addition to other claims, they submit that ACC and Arkla are liable for future lost profits that they would have received had the defendants properly performed for the ten-year term of the Agreement.

On February 5, 1992, ACC and Arkla filed a motion for partial summary judgment requesting, inter alia,[1] dismissal of claims for *165 loss of future profits beyond May 31, 1991, the date that Barnco terminated the Agreement pursuant to paragraph 11.01. ACC and Arkla argued that while lost profits may be recovered for losses resulting from alleged nonperformance before May 31, 1991, they were not recoverable for any failure to perform under the Agreement after the termination date.

By judgment dated December 14, 1992, the trial court granted ACC's and Arkla's motion for partial summary judgment stating:

IT IS HEREBY ORDERED, ADJUDGED AND DECREED that the applicable law clearly provides in light of the unambiguous terms of the contract between the parties that plaintiffs' claims for damages are limited to those losses which occurred as a result of the alleged breach by the defendant or defendants on or prior to May 31, 1991 as fully set forth in defendants' briefs which are adopted herein on that issue only, and to this extent only, the Motion For Partial Summary Judgment is granted.
Plaintiffs appeal the trial court's judgment.

DISCUSSION

On appeal appellants steadfastly maintain that they are entitled to recover full damages, including lost profits for the entire ten-year term of the Agreement. Appellants point out that none of the relevant Louisiana Civil Code articles [Arts. 1994, 1995, 2013, 2017, 2018] limit their recovery to damages occurring before termination, citing numerous cases from this state and others that have awarded future lost profits as "damages" for breach of contract.

Just as steadfastly, Arkla and ACC maintain the correctness of the trial court ruling, arguing that in none of the cases cited by appellants did the obligee exercise a contractual right of dissolution, as in the instant case. While agreeing that recovery for loss of future profits is allowed for breach of contract, appellees argue that the case at bar is more properly resolved under articles 2017 and 2018 of the Louisiana Civil Code, which provide as follows:

Art. 2017. Express dissolution clause
The parties may expressly agree that the contract shall be dissolved for the failure to perform a particular obligation. In that case, the contract is deemed dissolved at the time it provides for or, in the absence of such a provision, at the time the obligee gives notice to the obligor that he avails himself of the dissolution clause.
Art. 2018. Effects of dissolution
Upon dissolution of a contract, the parties shall be restored to the situation that existed before the contract was made. If restoration in kind is impossible or impracticable, the court may award damages.

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Bluebook (online)
628 So. 2d 162, 1993 La. App. LEXIS 3675, 1993 WL 492510, Counsel Stack Legal Research, https://law.counselstack.com/opinion/barnco-intern-inc-v-arkla-inc-lactapp-1993.