Sperry Marketing v. Newco, Inc.

• Court: Court of Appeals for the Tenth Circuit
• Decided: May 21, 1998
• Docket: 97-3101
• Status: Unpublished

Opinion

F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS MAY 21 1998 TENTH CIRCUIT PATRICK FISHER Clerk

SPERRY MARKETING, INC.,

Plaintiff-Appellant, v. No. 97-3101 (D.C. No. 96-2155-GTV) NEWCO, INC.; SWING N SLIDE (D. Kan.) CORPORATION,

Defendants-Appellees.

ORDER AND JUDGMENT *

Before ANDERSON and KELLY, Circuit Judges, and BRETT, District Judge. †

Plaintiff-Appellant Sperry Marketing appeals the entry of summary

judgment dismissing its diversity action for breach of contract against defendants-

appellees Newco and Swing N Slide (Swing N Slide). Swing N Slide succeeded

Newco by merger in 1992. Sperry claimed Swing N Slide violated its

Independent Sales Representative Agreement (Agreement) under which Sperry

sold Swing N Slide’s products. The district court held Sperry was equitably

* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. This court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3. † The Honorable Thomas R. Brett, Senior United States District Judge for the Northern District of Oklahoma, sitting by designation. estopped to assert breach of the contract, noting Sperry failed to address equitable

estoppel in its response to the summary judgment motion. On appeal Sperry

argues the district court erred in granting summary judgment on the basis of

equitable estoppel. Our jurisdiction arises under 28 U.S.C. § 1291, and we

affirm.

The following facts are either uncontested or are presented in the light most

favorable to Sperry. In October 1990, Sperry and Swing N Slide entered into a

written contract, the Agreement, under which Sperry became a sales

representative for Swing N Slide’s products in return for a five percent sales

commission. Sperry’s sales territory consisted of Arkansas, Iowa, Kansas,

Louisiana, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, and

Texas. The Agreement was for an indefinite term, and was terminable at will by

either party with one month’s notice.

In April 1992, Swing N Slide informed Sperry in writing that it was

reducing Sperry’s commission for sales on its Builders Square account from five

percent to three percent. Sales commissions on all other accounts remained at

five percent. Sperry’s president, Thomas Sperry, submitted an affidavit in which

he attests he “personally objected to each of the unilateral changes in the

contract.” Aplt. App. at 150. In his deposition, Mr. Sperry testified that he could

recall no specific discussion with Swing N Slide about this change, but he was

-2- generally upset and was sure he called and said so. See id. at 49. He testified

this was not a specific recollection, but said, “I think it’s something I think I

probably did.” Id. Following this reduction, Sperry accepted checks based on the

reduced commission for more than three years, until the relationship was

terminated.

In May 1992, Swing N Slide notified Sperry in writing that it was removing

Arkansas, Louisiana, Minnesota, North Dakota, South Dakota, and Texas from

Sperry’s sales territory. Sperry again expressed its displeasure to Swing N Slide.

Mr. Sperry’s account of his discussion with a Swing N Slide officer was, “We

asked, you know, why and we’d always done a good job and it seems like this is

what we got for a reward for a job well done.” Id. Mr. Sperry had dinner with a

Swing N Slide officer in which he tried to persuade Swing N Slide to give back

the commission and territory. Mr. Sperry testified that he did not recall saying

anything to the effect that Sperry was violating the Agreement by taking away

territory. See id. at 50. “The arguments,” Mr. Sperry stated, “were—had more to

do with the job we were doing . . . .” Id.

Mr. Sperry continued some sales efforts in Texas after the territory

reduction, and maintained two full-time salespeople in Texas selling other

products Sperry represented. Mr. Sperry stated in his affidavit that it would have

required little additional expense to continue marketing Swing N Slide products in

-3- Texas. Nevertheless Sperry sent four letters to various accounts in Texas stating,

“Regretfully, on June 30, 1992 we will no longer represent Newco Swing-N-Slide

with your company.” Id. at 73-76. In April 1993, Swing N Slide sent Sperry a

note confirming its territory and other information. A cover letter requested that

the note be faxed back to Swing N Slide with all corrections marked on it, or, if

everything was correct, that it be faxed back with the notation “OK.” On Mr.

Sperry’s return fax he had written, “OK Fax back” above his signature. Sperry

continued to accept commission checks from Swing N Slide based on the

decreased sales area. Swing N Slide, meanwhile, engaged other sales

representatives to cover the area it took from Sperry, paying $538,104.77 in

commissions to the new representatives over the remainder of the time the

Agreement was in effect.

Finally, in March 1995, Swing N Slide informed Sperry by letter that

effective April 15, 1995, Sperry’s sales commission on all sales would be cut to

three percent. Three Sperry officers travelled to Janesville, Wisconsin to make a

presentation to Swing N Slide. In the materials they presented was a statement in

bold type referring to the prior territory and commission reductions: “Newco

portrayed, and we eventually accepted, that these changes were for the betterment

of the company.” Id. at 94. Mr. Sperry’s affidavit states that the word “accepted”

meant “believed,” not “agreed to.” Id. at 149. Swing N Slide partially relented,

-4- allowing certain commissions to remain at five percent. Sperry continued to

accept commission checks reflecting the reduction after April 15, 1995. Between

1992 and 1995 Sperry accepted $1.2 million in commissions from Swing N Slide.

There is no evidence of any written objection to Swing N Slide’s reductions of

commissions or territory.

In September, 1996 Swing N Slide sent notice to Sperry that it was

terminating the Agreement. Sperry does not challenge the termination.

We review the grant of summary judgment de novo, applying the same legal

standard used by the district court. See McIlravy v. Kerr-McGee Corp., 119 F.3d

876, 879-80 (10th Cir. 1997). Summary judgment is appropriate only if the

record, viewed in the light most favorable to the non-movant, reveals no genuine

issue of material fact and the moving party is entitled to judgment as a matter of

law. See id.; Fed. R. Civ. P. 56(c). If there is no genuine issue of material fact,

we next determine whether the substantive law was correctly applied.

See Law v. NCAA, 134 F.3d 1010, 1016 (10th Cir. 1998). The parties agreed,

and the district court correctly held, that the substantive law of Wisconsin governs

this action. See Equifax Servs., Inc. v. Hitz, 905 F.2d 1355, 1360 (10th Cir.

1990).

Although one of the grounds upon which Swing N Slide moved for

summary judgment was equitable estoppel, Sperry’s response to the summary

-5- judgment motion failed to address equitable estoppel. In its motion for

reconsideration, which we consider as made pursuant to Fed. R. Civ. P. 59(e),

Sperry attempted to remedy this failure, presenting to the court for the first time

facts and argument on equitable estoppel. The district court denied the motion,

relying on the rule that a party may not raise new theories or arguments on

reconsideration that were available to it at the time the original motion was

briefed. See Van Skiver v. United States, 952 F.2d 1241, 1243 (10th Cir. 1991),

cert. denied, 506 U.S. 828 (1992).

A similar rule governs Sperry’s appeal of the issue of equitable estoppel.

Absent unusual circumstances, a party may not raise in the court of appeals an

argument which it did not present to the district court until a motion for

reconsideration. See Lyons v. Jefferson Bank & Trust, 994 F.2d 716, 721-22

(10th Cir. 1993); Burnette v. Dresser Indus., 849 F.2d 1277, 1285 (10th Cir.

1988). Because Sperry did not argue equitable estoppel to the district court until

its untimely motion, and consequently the district court was not properly given the

opportunity to consider and dispose of the arguments, we will not consider them

on appeal. See Burnette, 849 F.2d at 1285.

This rule is tempered somewhat by our de novo review of a grant of

summary judgment to ensure that the district court correctly applied the

substantive law. See Law, 134 F.3d at 1016. Moreover, we may notice plain

-6- error in this context if the error would seriously affect the fairness, integrity or

public reputation of judicial proceedings. See Glenn v. Cessna Aircraft Co., 32

F.3d 1462, 1464 (10th Cir. 1994); see also Daigle v. Shell Oil Co., 972 F.2d 1527,

1539 (10th Cir. 1992).

Wisconsin has defined equitable estoppel as “(1) action or non-action, (2)

on the part of one against whom estoppel is asserted, (3) which induces

reasonable reliance thereon by the other, either in action or non-action, and (4)

which is to his or her detriment.” Milas v. Labor Ass’n, 571 N.W.2d 656, 660

(Wis. 1997). The party asserting estoppel as a defense has the burden of proving

it by clear, satisfying, and convincing evidence, see Gabriel v. Gabriel, 204

N.W.2d 494, 497 (Wis. 1973) and any reliance must have been reasonable, see

Consumer’s Co-op v. Olsen, 419 N.W.2d 211, 222 (Wis. 1988).

Viewing all the evidence in the light most favorable to Sperry, we agree

with the district court that Swing N Slide met its burden of demonstrating that no

genuine issue of material fact exists with respect to estoppel, and that under

Wisconsin law it is entitled to judgment as a matter of law. The record

demonstrates that Sperry’s actions and affirmative representations indicated to

Swing N Slide that it had acceded to the modifications. Although Sperry

attempted to persuade Swing N Slide to reconsider, there is no evidence of an

adequate objection on the basis of its contract. See Milas, 571 N.W.2d at 660

-7- (holding estoppel was established based on course of conduct and failure to

object). These actions and non-actions by Sperry, over the four-year period

between the first modification and the termination of the contract, reasonably

induced Swing N Slide to engage replacement sales representatives and pay them

$538,104.77 in commissions, to its detriment. Although Sperry at all times had

the right to decline to accept the new terms or to terminate the Agreement, it

never did so. Silence and the failure to exercise rights alone may reasonably be

relied upon to establish estoppel. See Consumer’s Co-op, 419 N.W.2d at 221

(“Defendants had the right to rely on plaintiff's failure to exercise its right.”).

Mr. Sperry’s affidavit stating that he personally objected to each

modification is a conclusion that states no specific fact from which a jury could

find an objection was made so as to preclude reasonable reliance by Swing N

Slide. Sperry cannot survive summary judgment by “replac[ing] conclusory

allegations of the complaint or answer with conclusory allegations of an

affidavit.” Lujan v. National Wildlife Fed’n, 497 U.S. 871, 888-89 (1990).

Moreover, Mr. Sperry’s affidavit conflicts with his deposition testimony, in which

he stated he had no specific recollection of making an objection to the first

modification, but thinks he probably made a telephone call to express his

displeasure. Although the court ordinarily may not discount an affidavit, a party

cannot create an issue of fact by submitting an affidavit which differs without

-8- explanation from the affiant’s deposition. See Franks v. Nimmo, 796 F.2d 1230,

1237 (10th Cir. 1986). We conclude as a matter of law that Sperry’s conduct was

inconsistent with the terms of the original contract to such a degree as to compel a

finding that Swing N Slide reasonably relied upon Sperry's conduct to its

detriment, so that Wisconsin’s equitable considerations prohibit Sperry from

asserting its contract rights. The district court correctly applied the substantive

law, and we find no plain error.

AFFIRMED.

Entered for the Court

Paul J. Kelly, Jr. Circuit Judge

-9-