Orion Financial Corp. of South Dakota v. American Foods Group, Inc.

281 F.3d 733
CourtCourt of Appeals for the Eighth Circuit
DecidedFebruary 25, 2002
Docket00-2692, 00-3064
StatusPublished
Cited by3 cases

This text of 281 F.3d 733 (Orion Financial Corp. of South Dakota v. American Foods Group, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Orion Financial Corp. of South Dakota v. American Foods Group, Inc., 281 F.3d 733 (8th Cir. 2002).

Opinion

*737 WOLLMAN, Chief Judge.

This appeal arises from a contract dispute. Both parties prevailed on some of their claims, and both appeal. We affirm in part, reverse in part, and remand.

I.

Orion Financial Corp. (Orion) and American Foods Group, Inc. (American Foods) entered into a consulting agreement (the Agreement) on April 1, 1994, under which Orion agreed to procure grants and loans for the benefit of American Foods. Under the Agreement, Orion is entitled to a flat rate fee and “success fees” determined as a percentage of each grant or loan amount Orion procured. The Agreement defines various categories of grants and loans in subsections (b)(1) to (b)(6) and sets forth applicable success fees for each type. American Foods terminated the Agreement effective April 27, 1995. The Agreement provides that Orion is entitled to full success fees for any loans or grants American Foods received within one year of termination and that it is entitled to fifty percent of the applicable success fees for any loans and grants received between twelve and eighteen months after termination.

As the district court observed, the definitions found in (b)(1) to (b)(6) of the Agreement are not a model of clarity. Only section (b) and subsections (b)(1), (b)(5) and (b)(6) are relevant to this appeal. These sections state:

b) A success fee [is] to be paid upon the completion of each component of financing .... American Foods shall not be obligated to pay Orion success fees in excess of $350,000 .... The success fees shall be paid based on the following:
1) Upon the completion of new senior secured debt, subordinated debt, convertible debt or equity. This success fee will be three and one half [percent] (3.5%) on the first $2,000,000 of any such debt or equity placed and four and one half percent (4.5%) of any such additional debt or equity placed. Subordinated debt, convertible debt or equity shall be any capital which is not secured by a perfected first security interest in real estate, capital equipment or accounts receivable and inventory.
5) Upon the completion of any grant or forgivable loans provided by the State of South Dakota or any other governmental entity related to the John Morrell & Co. incentive package. This success fee will be three and one half percent (3.5)% [sic] of any such financing above $750,000.
6) Upon the completion of any loans provided by the State of South Dakota or any other governmental entity related to the John Morrell & Co. incentive package. This success fee will be two percent (2%) of any such financing above $2,000,000.

American Foods received numerous grants and loans during the period covered by the Agreement. It paid the base fee and some success fees, as follows. First, it paid $61,250 on a $2.5 million forgivable loan from the Governor’s Office of Economic Development under (b)(5). This fee is not disputed. American Foods also paid success fees of $33,250 on a $950,000 loan from the Greater Huron Development Corporation under (b)(5) (Greater Huron Development Corp. loan). American Foods counterclaimed for refund of this payment. The district court granted summary judgment to Orion on the counterclaim, and American Foods appeals.

Orion sued to recover success fees on several other instances of funding. The *738 district court granted fees on the following amounts. The district court placed under subsection (b)(1) a renegotiated revolving loan from CIT corporation (CIT loan) and a capital lease from Cryovac (Cryovac lease); under subsection (b)(5) a $250,000 grant to the City of Huron, South Dakota (Huron grant); and under subsection (b)(6) a $2.7 million loan to the City of Huron, South Dakota (Huron loan), a $100,000 loan from the City of Mitchell, South Dakota (Mitchell loan), a $200,000 loan from the Areawide Business Council for the City of Mitchell (Areawide loan), and a $750,000 REDI loan from the South Dakota Board of Economic Development to American Foods (REDI loan). The district court granted success fees on all these transactions on summary judgment, except on the Cryovac lease, which it granted after trial. American Foods appeals from all these rulings. Orion appeals from only some of them, claiming that it should have received more fees on some of the loans.

In addition, the district court granted prejudgment interest to Orion from the date Orion demanded payment from American Foods. On appeal, Orion claims that it should have been awarded prejudgment interest from earlier dates.

Finally, Orion also claims it should receive attorney fees and collection costs as provided in the Agreement. The district court held that the attorney fees provision in the contract violated South Dakota law and denied the request.

II.

We review the issues on which the district court granted summary judgment de novo. Henerey v. City of St. Charles, 200 F.3d 1128, 1131 (8th Cir.1999). Summary judgment is proper if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Id.; Fed. R.Civ.P. 56(c). We review the district court’s factual findings at trial under the “clearly erroneous” standard, and its legal conclusions de novo. Chicago Title Ins. Co. v. FDIC, 172 F.3d 601, 604 (8th Cir.1999).

In a diversity case, the contract must be construed according to state law. Barry v. Barry, 172 F.3d 1011, 1013 (8th Cir.1999). We review the district court’s interpretation of state law de novo. Michalski v. Bank of Am. Ariz., 66 F.3d 993, 995 (8th Cir.1995) (citing Salve Regina Coll. v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991)). As a federal court, our role in diversity cases is to interpret state law, not to fashion it. Thus, if the state law is unsettled, it is our duty to apply the rule we believe the South Dakota Supreme Court would follow. Novak v. Navistar Int’l Transp. Corp., 46 F.3d 844, 847 (8th Cir.1995).

In South Dakota, whether a contract is ambiguous is a matter of law. Ducheneaux v. Miller, 488 N.W.2d 902, 909 (S.D.1992). A contract is ambiguous if “it is reasonably capable of being understood in more than one sense.” Id. (quotation omitted).

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
281 F.3d 733, Counsel Stack Legal Research, https://law.counselstack.com/opinion/orion-financial-corp-of-south-dakota-v-american-foods-group-inc-ca8-2002.