Snow Making v. Niedner

• Court: District Court, D. New Hampshire
• Decided: March 3, 1998
• Docket: CV-97-079-M
• Status: Published

Opinion

Snow Making v. Niedner CV-97-079-M 03/03/98 UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE

Snow Making Services, Inc., Plaintiff

v. Civil No. 97-79-M

Niedner Limited, Defendant

O R D E R

Niedner Limited has filed a motion for partial summary

judgment on claims based on agreements entered into and actions

taken prior to the parties' execution of a settlement and

distributorship agreement dated August 14, 1996. Snow Making

objects, alleging that the settlement agreement is not

enforceable because it was obtained through fraud and economic

duress and, alternatively, because Niedner breached the

agreement. For the reasons that follow, summary judgment is

granted in part.

Standard of Review

Summary judgment is appropriate if the "pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party

is entitled to judgment as a matter of law." Fed. R. Civ. P.

56(c). The moving party first must show the absence of a genuine

issue of material fact for trial. Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 256 (1986) . If that burden is met, the opposing party can avoid summary judgment on issues that it must

prove at trial only by providing properly supported evidence of

disputed material facts that would reguire trial. Celotex Corp.

v. Catrett, 477 U.S. 317, 322 (1986); accord Denovellis v.

Shalala, 124 F.3d 298, 305-06 (1st Cir.1997) ("Once the moving

party has properly supported her motion for summary judgment, the

burden shifts to the nonmoving party, with respect to each issue

on which he has the burden of proof, to demonstrate that a trier

of fact could reasonably find in his favor."). The court

interprets the record in the light most favorable to the

nonmoving party and resolves all inferences in its favor.

Saenger Organization v. Nationwide Ins. Assoc., 119 F.3d 55, 57

(1st Cir. 1997). Thus, summary judgment will be granted if the

record shows no trialworthy factual issue and if the moving party

is entitled to judgment as a matter of law. EEOC v. Green, 76

F .3d 19, 23 (1st Cir. 1996) .

Background1

The present dispute arises from the failed business

relationship between Niedner and Snow Making. In February 1995

the parties agreed that Snow Making would act as a distributor of

Niedner's snow making eguipment. Snow Making alleges that

Niedner almost immediately breached the agreement. In March

1 Because Snow Making did not include a "short and concise statement of material facts, supported by appropriate record citations, as to which the adverse party contends a genuine dispute exists so as to reguire trial," the court presents the facts for background purposes only. LR 7.2(b)(2).

2 1996, Snow Making and Niedner entered a new agreement for the

1996-1997 season, which apparently did little to enhance

relations between them. On April 1, Niedner sent an amendment to

the agreement that changed Snow Making's status from exclusive to

nonexclusive distributor.

In June 1996, Snow Making commenced suit in state court by

serving Niedner with a Writ of Summons alleging that Niedner

breached both the 1995 and 1996 agreements. The parties met on

July 5, 1996, to discuss settlement, apparently before the served

writ was actually filed with the Superior Court. As a result of

their July 5th discussion, the parties signed a settlement

agreement that described the business relationship they would

maintain until March 31, 1997, subject to two conditions: a new

distributorship agreement would be entered into, and Snow

Making's claims based on the March 1996 agreement and any other

agreements for the 1996-1997 season would be dropped.

The parties signed a new distributorship agreement on August

14, 1996. But the new agreement apparently spawned a new series

of disputes, that led eventually to termination of the

distributorship in January 1997. Snow Making filed this suit,

alleging breach of the parties' agreements, and Niedner asserts

counterclaims for breach of contract and fraud.

Discussion

Niedner moves for partial summary judgment on grounds that

Snow Making cannot assert claims for breach of the parties'

3 earlier agreements given the settlement agreement and superseding

distributorship agreement. In response. Snow Making contends

that it ought to be allowed to rescind the settlement agreement

because Niedner breached the agreement and because Snow Making

was induced to settle based on economic duress created by

Niedner's business practices and by fraud. Before reaching the

merits of the summary judgment motion, some discussion of

preliminary matters is reguired.

First, the court points out that its analysis of the current

motion was substantially hampered by plaintiff's failure, in

large part, to make specific references to the record to support

its objection to summary judgment. Nevertheless, the court will

attempt to construe the record as reguired by Rule 56(c), rather

than reguire plaintiff to supplement its pleading.

Second, the court notes that neither party has addressed a

possible choice-of-law issue suggested by the distributorship

agreement. The August 1996 agreement provides at section 21.1:

"This Agreement shall be governed and construed in accordance

with the laws of the Province of Quebec. The United Nations

convention on international sales of goods shall apply to this

Agreement." Neither party has provided notice of its intent to

raise an issue involving application of the law of a foreign

country. See Fed. R. Civ. P. 44.1. Therefore, the court will

apply the decisional law of New Hampshire. See Putnam Resources

v. Pateman, 958 F.2d 448, 466 n.19 (1st Cir. 1992).

4 Third, although the parties seem to agree that their

settlement agreement, if valid and enforceable, would preclude

claims based on the parties' business disputes antedating the

agreement, the actual terms of the agreement seem to settle

claims arising from the March 13, 1996, letter agreement and

agreements or representations made after that date, but not

claims based on their dealings from February 1995 until March

1996. The July 5 agreement states on page 3:

The parties agree that this agreement in principle is subject to the entering into of (1) a formal distributorship agreement for the period from April 1, 1996 to March 31 (11) the execution of a discharge by SMS of any claim arising from the March 13, 1996 letter of agreement or any other verbal or written communication made prior to the date hereof relating to the period from March 1, 1996 to February 28, 1997.

Snow Making's state court writ included allegations based on the

parties' dealings between February 1995 and March 1996 as well as

after March 1996. Although the unfiled stipulation for docket

markings says "no further action for the same cause," which would

seem to include claims based on the parties' agreements prior to

March 13, 1996, it remains unclear what effect that undocketed

stipulation may have on the present suit. At least one plausible

interpretation of the settlement might be that it applied to

claims based on the agreements after March 13, 1996, but did not

apply to claims based on the parties' dealings prior to that

date.

Putting aside these ambiguities for the moment, the court

will consider the issues raised in Niedner's pending motion for

summary judgment and Snow Making's objection.

5 A. Election of Remedies

Niedner suggests that Snow Making is impermissibly

attempting "to have its cake and eat it too" by bringing claims

based on the parties' settled disputes that would reguire

rescission of their settlement agreement, while at the same time

bringing claims for breach of the settlement agreement that would

reguire enforcement of the agreement. Niedner has not developed

its argument any further, and therefore the court declines to

consider the doctrine of election of remedies as a separate basis

for partial summary judgment. See, e.g.. In re Estate of Ward,

129 N.H. 4, 10 (1986) (discussing limited doctrine of election of

remedies under Ricker v. Mathews, 94 N.H. 313, 317 (1947)).

B. Breach as Grounds for Recission

A party's breach of contract may allow the remedy of

rescission "only where the contractual breach is of vital

importance . . . and should be granted only 'when in all the

circumstances it appears right and just to the parties to do

so.'" Patch v. Arsenault, 139 N.H. 313, 318 (1995) (guoting

Barber v. Somers, 102 N.H. 38, 42 (1959)). Here, Snow Making

claims in conclusory fashion, apparently based on statements in

Alan Dubeau's affidavit, that Niedner breached the August 1996

distributorship agreement.

Snow Making claims that Niedner breached by failing and

refusing to provide pricing information in a timely manner and by

failing to provide reasonable assistance for sales since Niedner

6 did not send a representative to attend trade shows or to meet

with prospective customers. However, the agreement itself

provides pricing information in schedule B, and Snow Making has

not shown that the information provided failed to meet Niedner's

contractual obligations. While the agreement reguires

"reasonable assistance" in sales and training, it does not seem

to reguire attendance by Niedner representatives at trade shows

or on sales calls, and Snow Making has not shown that its reading

of such obligations into the contract language is at least

reasonable.

Thus, Snow Making has not sustained its burden to

demonstrate the existence of a triable issue as to whether a

breach occurred at all, and therefore, the court need not

consider whether a breach was of "vital importance" or whether

rescission would be appropriate here. The court notes, however,

that even if Snow Making were able to show a vitally important

breach. Snow Making's failure to return its benefits under the

contract, and its own apparent breaches of the same agreement

would likely persuade the court that the eguitable remedy of

rescission would not be appropriate under these circumstances.

C. Economic Duress as Grounds for Recission

To invalidate the settlement based on business compulsion or

economic duress. Snow Making must show "that [it] involuntarily

accepted the other party's terms, that the coercive circumstances

were the result of the other party's acts, that the pressure

7 exerted by the other party was wrongful, and that under the

circumstances the plaintiff had no alternative but to accept the

other party's terms." King Enterprises v. Manchester Water

Works, 122 N.H. 1011,1014 (1982). Snow Making argues that

Niedner's refusal to honor its exclusive distributorship

commitment in the March 1996 agreement created circumstances of

economic duress that forced Snow Making to capitulate to

Niedner's settlement terms.

Snow Making provides no factual support, however, for its

claimed economic hardship, other than statements in Dubeau's

affidavit. Dubeau says that Snow Making was unable to do

business after April 1996 because Niedner refused to provide

pricing information unless Snow Making agreed to become a

nonexclusive distributor. The March agreement, however, includes

pricing information that Niedner represented it would try to hold

until October 1996. Snow Making has not shown why that pricing

information was inadeguate to support continued operation under

the March agreement.

Further, the record includes no evidence of Snow Making's

economic condition during the relevant period and, therefore,

does not demonstrate the degree of economic impact of any

interruption in sales activity, if that occurred. Snow Making's

conclusory statements that it "faced bankruptcy" are not

sufficiently supported by the record to create a triable issue

about its financial condition. In addition, Niedner points to

the express terms of the settlement, in which Snow Making agreed to immediately pay its outstanding debt to Niedner, to show that

Snow Making did not seem to be suffering financial hardship.

Based on the record presented here. Snow Making has not

demonstrated that it suffered wrongful economic duress at the

hands of Niedner at the time it settled its claims against

Niedner.

D. Fraud as Grounds for Recission

Snow Making contends that it settled its claims against

Niedner based on fraudulent representations made during the July

5th settlement meeting. To prove fraud. Snow Making must show

"'that [Niedner] intentionally made material false statements

which [it] knew to be false or which [it] had no knowledge or

belief were true, for the purpose of causing, and which [did]

cause, [Snow Making] reasonably to rely to [its] detriment.'"

Snow v. American Morgan Horse Ass'n, Inc., 141 N.H. 467, 468

(1997) (guoting Caledonia, Inc. v. Trainor, 123 N.H. 116, 124

(1983)).

Snow Making alleges misrepresentation based on Niedner's

promise to pay Snow Making ten percent of all hose product sold

in the eastern area by other sellers and to allocate eighty

percent of Fall Line's sales to that category. Niedner's sales

manager provided information about Fall Line's alleged sales in

the preceding years, which Snow Making's president relied on, in

part, to project likely income for the 1996 sales year. In fact.

Fall Line had sold no snow hose at all as of the time of the July 5 meeting. Snow Making also alleges that Niedner's

representation that it had granted Fall Line a distributorship

was false.

Taking the facts in Snow Making's favor, the circumstances

alleged might well support an inference that Niedner knowingly

and falsely represented to Snow Making that Fall Line was making

sales, and would be making future sales that would benefit Snow

Making. However, it must be remembered, that Snow Making and

Fall Line were competitors. To the extent Fall Line sold hose

product, it presumably took some sales from Snow Making.

Therefore, although Snow Making might have expected a certain

benefit from Fall Line's sales between March and July 1996, after

July, Snow Making would do better economically if it, rather than

Fall Line made the sales. It is unclear on this record what

benefit Snow Making would reasonably have expected from Fall

Line's sales in the first half of 1996. Therefore, Snow Making

has not shown that Niedner's representations about Fall Line were

reasonably material to its decision to enter the settlement

agreement, or that a reasonable person in Snow Making's position

would have relied on the information to make its decision.

Snow Making also argues that it was fraudulently induced to

enter the settlement by Niedner's representation that it would

allow Snow Making to sell Niedner Econo Flow hose. Niedner then,

according to Snow Making (but without factual support in the

record), refused to provide necessary pricing information. Even

if Snow Making could support its conclusory allegations by

10 pointing to facts in the record, its allegations would amount to

breach of the agreement, not fraudulent misrepresentation.

The other representations that Snow Making relies on as

evidence of fraud are merely allegations of Niedner's breach of

the March 1996 agreement. Since Snow Making knew at the time of

the settlement that Niedner had not performed as it expected, and

since breach of the March 1996 agreement was the subject of Snow

Making's law suit, those representations cannot be construed to

have any bearing on Snow Making's decision to enter the

settlement agreement.

E. Ratification

Alternatively, Niedner argues that even if Snow Making could

show that the settlement was induced by improper means. Snow

Making ratified the agreement by accepting its benefits, which it

still has not repudiated. Unless a party repudiates the benefits

of a contract entered under duress within a reasonable time, the

contract will be deemed ratified. See Keshisian v. CMC

Radiologists, 698 A.2d 1228,1232 (N.H. 1997). Continuing

economic hardship is not sufficient to justify retaining contract

benefits. Id. Therefore, Snow Making's operating under the

August 1996 distributorship agreement until Niedner terminated it

in January 1997, and its failure to return unearned benefits

accepted under the agreement, likely amounted to ratification of

the agreement sufficient to preclude rescission. See id. at

11 12 33; see also Shafmaster v. Shafmaster, 138 N.H. 460, 467

(1994) .

Conclusion

Snow Making has not shown that a triable issue exists with

respect to whether the settlement agreement should be rescinded

at least with regard to its claims based on the parties' March

1996 agreement. Accordingly, Niedner is entitled to summary

judgment in its favor on Counts II, IV, and V of the complaint.

As discussed, above, however, Niedner has not made a sufficient

showing that it is entitled to judgment as a matter of law with

respect to Count I, which is based on the parties' February 1995

agreement. Accordingly, Niedner's motion for partial summary

judgment (document no. 27) is granted as to Counts II, IV, and V

only, and is otherwise denied.

SO ORDERED.

Steven J. McAuliffe United States District Judge

March 3, 1998

cc: C. Nicholas Burke, Esg. Warren C. Nighswander, Esg.