Innovative Sales LLC v. Northwood Mfg Inc ( 2008 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 6, 2008
No. 07-30598
Charles R. Fulbruge III
Clerk
INNOVATIVE SALES LLC,
Plaintiff-Appellant,
v.
NORTHWOOD MANUFACTURING INC; NORTHWOOD OF VIRGINIA
LLC; NORTHWOOD INVESTMENTS, LLC,
Defendants-Appellees.
Appeal from the United States District Court
for the Middle District of Louisiana
USDC No. 3:05–CV–1407
Before GARWOOD, CLEMENT, and ELROD, Circuit Judges.
PER CURIAM:*
Innovative Sales LLC (“Innovative”) filed this diversity action alleging that
Northwood Manufacturing, Inc., Northwood of Virginia LLC, and Northwood
Investments, LLC (collectively, “Northwood”) breached their travel-trailer
agreement and engaged in unfair and deceptive trade practices in violation of
Louisiana law. The district court granted Northwood’s motion for summary
judgment, and Innovative appealed. We affirm.
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
No. 07-30598
I. FACTUAL AND PROCEDURAL BACKGROUND
To market its travel trailers, Northwood offers “franchise” or “territory”
agreements to various dealers around the country. In 2004, Northwood entered
into such an agreement with Innovative. The handwritten agreement, titled
“DEALER AGREEMENT FOR INNOVATIVE SALES W/ NORTHWOOD
MANUFACTURING,” reads in full as follows:
The territory for Innovative Sales, L.L.C. is bordered on the
North by the Mississippi state line that is south of Alexandra [sic],
La.; the Eastern limit is the Mississippi state line; the South limit
is I-10 at the I-55 intersection & North of the I-12 & I-10 which is
North of Lake Ponthartrain [sic]; the West limit includes Lafayette,
LA & New Iberia.
No new dealer shall be established in New Orleans, LA before
10-30-2004 or after with an initial stocking order of less than 10
units. Furthermore[,] Innovative Sales, LLC will have an
opportunity to preclude a New Orleans dealer from opening by
making a stocking order which will match the order of a prospective
New Orleans dealer.
Innovative Sales agrees to innitially [sic] stock 2 units and to
increase the stocking inventory by an additional 2 units per month
untill [sic] a standard stocking inventory of 10 units is reached. If
the minimum stocking inventory requirements are not met, then
Northwood Mfg. may sign other dealers in the territory serviced by
Innovative Sales.
This agreement applies to all Northwood Mfg. products.
Innovative alleges that after about a year, Northwood asked Innovative to
sell the trailers at higher prices due to other dealers’ complaints about losing
business to Innovative, and that when Innovative refused, mutual animosity
developed. Innovative further alleges that when it ordered as many FEMA
trailers as were available following Hurricane Katrina, Northwood
misrepresented that it could not comply because it had received a large order
from another dealer, Bourget’s of the South, LLC (“Bourget’s”), although the real
reason was residual “personal animosity.” Such was the case, Innovative claims,
even though Bourget’s was not a licensed dealer under Louisiana law, was not
a franchisee of Northwood, was paying Northwood inflated prices, was located
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No. 07-30598
within Innovative’s exclusive coverage area, and was allowed to place an order
that Innovative had no opportunity to match. As a result of these events,
Innovative filed a diversity action in the district court alleging that Northwood’s
actions, undertaken in bad faith, breached the terms of their contract.
Innovative also argued that these same actions violated the Louisiana Unfair
Trade Practices and Consumer Protection Act (“LUTPA”).
Northwood then filed a motion for summary judgment, which the district
court granted for the following reasons. First, the district court found no breach
of contract because the agreement clearly demonstrated that Innovative’s and
Bourget’s territories did not overlap, and because the unambiguous nature of the
terms rendered Innovative’s parol evidence for the purpose of proving intent
inadmissible. Second, the district court held that “because . . . [Northwood’s]
conduct did not breach the contract with [Innovative], [Northwood] clearly ha[d]
not engaged in unfair trade practices vis-a-vis [Innovative].” Innovative appeals.
II. STANDARD OF REVIEW
A district court’s grant of summary judgment is reviewed de novo. Hall
v. Gillman Inc., 81 F.3d 35, 36 (5th Cir. 1996) (citing Neff v. Am. Dairy Queen
Corp., 58 F.3d 1063, 1065 (5th Cir. 1995)). Summary judgment is proper only
when “the pleadings, the discovery and disclosure materials on file, and any
affidavits show that there is no genuine issue as to any material fact and that
the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(c).
The movant bears the initial burden of “‘demonstrat[ing] the absence of a
genuine issue of material fact,’ but need not negate the elements of the
nonmovant’s case.” Little v. Liquid Air. Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)
(quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). If the movant meets
this burden, then “the nonmovant must go beyond the pleadings and designate
specific facts showing that there is a genuine issue for trial.” Id. (citing Celotex,
477 U.S. at 325). During this process, “factual controversies [are resolved] in
favor of the nonmoving party, but only when there is an actual controversy, that
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is, when both parties have submitted evidence of contradictory facts.” Id. The
materiality of facts depends on the substantive law, and “[o]nly disputes over
facts that might affect the outcome of the suit under the governing law will
properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986).
III. DISCUSSION
Innovative alleges that the district court erred in granting summary
judgment in favor of Northwood by: (1) accepting Northwood’s statement of
uncontested facts as uncontested; (2) disregarding the agreement’s “implied
obligations”; (3) disregarding Northwood’s violation of the duty of good faith; (4)
determining that Northwood had not breached the agreement’s express terms;
and (5) determining that Northwood had not engaged in unfair trade practices.
A. Northwood’s Statement of Uncontested Facts
Innovative first argues that the district court erroneously determined that
Northwood’s statement of uncontested facts was “uncontested and deemed
admitted.” This characterization is inaccurate. In its Ruling on Motion for
Summary Judgment, the district court initially sets out Northwood’s alleged
“uncontested facts,” commenting that “[s]ome of these ‘facts’ are immaterial
while others are not facts at all—they are conclusions of law.” Next, the district
court sets out Innovative’s purported “contested facts,” noting that “[t]he large
majority of these ‘facts’ are not facts at all—they are issues put before the court.”
The district court then sets out and explains Local Rule 56.2 by providing that
“[a]ll material facts set forth in the statement required to be served by the
moving party will be deemed admitted, for purposes of this motion, unless
controverted as required by this rule.”
After that, however, the district court never mentions the facts that it—as
opposed to the parties—considers controverted or uncontroverted and never
holds that Northwood’s statement of uncontested facts is indeed uncontested.
Rather, the district court goes on to explain that the contract is clear and
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No. 07-30598
unambiguous, and that based on the plain language, Northwood did not breach
the agreement or engage in unfair trade practices. Accordingly, the district
court did not erroneously accept Northwood’s statement of uncontested facts as
uncontested.1
B. Implied Obligations
Innovative also contends that the district court erred by “analyz[ing] only
the express provisions of the contract.” Instead, Innovative claims, the court
should have considered how Northwood breached the “implied obligations” of the
agreement by selling trailers to an unlicensed dealer2 within Innovative’s
exclusive territory, by refusing to deliver trailers in reasonable quantities to
Innovative, and by coercing or attempting to coerce Innovative into lowering its
prices. To support this argument, Innovative cites Louisiana Civil Code article
1768 for the proposition that “[c]onditions may be either expressed in a
stipulation or implied by the law, the nature of the contract, or the intent of the
parties,” and also relies upon various sections of Louisiana Revised Statute
32:773.1 (the Louisiana State Motor Vehicle statute) and several Louisiana
cases.
Furthermore, even if the district court had accepted Northwood’s statement of
1
uncontested facts as uncontested, Innovative’s claim that “the factual foundation of
Northwood’s summary proceeding is false” is foreclosed. In its supplemental reply brief,
Innovative points out that Northwood’s statement of uncontested facts cites a judgment of the
19th Judicial District Court, in the matter of Bourget’s of the South, L.L.C. v. La. State
Recreational & Used Motor Vehicle Comm’n, No. 541-552, as final authority for the proposition
that Bourget’s was a licensed dealer during the pertinent time period. Innovative claims that
this constitutes a material misrepresentation of fact because the Louisiana First Circuit Court
of Appeal later reversed that judgment. However, pursuant to a March 11, 2008, order of the
19th Judicial District Court, brought to our attention in Northwood’s Federal Rule of Appellate
Procedure 28(j) letter, the Louisiana First Circuit Court of Appeal’s decision was vacated as
an absolute nullity due to the State Recreational and Used Motor Vehicle Commission’s
intervening ruling that Bourget’s did have at all times relevant to this dispute a proper license
under Louisiana law.
As discussed supra, note 1, it is now a fact that Bourget’s was a licensed dealer during
2
the events at issue.
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No. 07-30598
None of this authority supports the extra-contractual obligations that
Innovative asks this court to read into the agreement. First, as Northwood
points out, it is untenable to baldly assert that statutes, regulations, and
ordinances typically regulated by governmental bodies or administrative
agencies are included as implied obligations in every Louisiana private contract.
Second, the cases upon which Innovative relies stand at most for the
following principle:
Into all contracts . . . good faith performance is implied.
Furthermore, everything that by equity is considered incidental to
the particular contract, or necessary to carry it into effect, is also a
part of all agreements. And . . . equity will supply such incidents
only as the parties may reasonably be supposed to have been silent
upon from a knowledge that they would be supplied from that
source.
Nat’l Safe Corp. v. Benedict & Myrick, Inc., 371 So. 2d 792, 795 (La. 1979). In
this case, however, the parties agree that an implied duty of good faith exists
and address that theory as an independent issue. Moreover, an experienced
dealer like Innovative cannot reasonably expect equity to supply terms from
outside ordinances and regulations to which the parties never agreed. While
such arguments may present issues between Northwood and the State of
Louisiana, they are immaterial to Innovative’s private breach of contract claims.
As a result, the district court did not erroneously disregard the agreement’s
“implied obligations.”
C. Duty of Good Faith
Innovative separately asserts that Northwood’s actions breached the
implied duty of good faith. It is true that “[g]ood faith performance is an implied
requirement of every contract under Louisiana law.” Grisaffi v. Dillard Dep’t
Stores, Inc., 43 F.3d 982, 983 (5th Cir. 1995) (citing LA. CIV. CODE ANN. art.
1983). This duty, however, applies only to obligations related to the specific
contractual duties. See Jones v. Honeywell Int’l, Inc., 295 F. Supp. 2d 652, 672
(M.D. La. 2003) (holding that because the plaintiff “allege[d] a general obligation
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No. 07-30598
unrelated to any contractual duty, she ha[d] not properly stated a cause of
action” for breach of the implied duty of good faith under Louisiana Civil Code
article 1983). The good faith requirement does not allow a party to read into the
contract additional obligations not contained therein.
As the district court held in ruling on Northwood’s motion for summary
judgment:
The document (1) does not set forth what actions are permitted or
prohibited within the territories; (2) does not obligate [Northwood]
to sell any specific number of trailers to [Innovative]; and (3) does
not forbid [Northwood] from selling trailers to Bourget’s in
[Innovative’s] “exclusive” territory (assuming that [Northwood] did,
indeed, do so).
Moreover, Innovative has failed to set forth any competent evidence that
Northwood did not perform the specified contractual duties in good faith.
Accordingly, the district court did not err in finding that Northwood did not
violate the duty of good faith.
D. Express Obligations
Innovative further claims that the same actions that allegedly violated the
agreement’s “implied obligations” also violated the agreement’s express terms.
This argument, too, is unavailing. The first paragraph of the Innovative-
Northwood agreement sets forth Innovative’s territory as follows:
The territory for Innovative Sales, L.L.C. is bordered on the
North by the Mississippi state line that is south of Alexandra [sic],
La.; the Eastern limit is the Mississippi state line; the South limit
is I-10 at the I-55 intersection & North of the I-12 & I-10 which is
North of Lake Ponthartrain [sic]; the West limit includes Lafayette,
LA & New Iberia.
The second paragraph restricts Northwood, in certain circumstances, from
establishing a new dealer in “New Orleans”:
No new dealer shall be established in New Orleans, LA before
10-30-2004 or after with an initial stocking order of less than 10
units. Furthermore[,] Innovative Sales, LLC will have an
opportunity to preclude a New Orleans dealer from opening by
making a stocking order which will match the order of a prospective
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No. 07-30598
New Orleans dealer.
Meanwhile, the Northwood-Bourget’s agreement sets forth Bourget’s territory
as follows:
beginning at a point south of intersection of I10 & I55 (LaPlace)
East to Chalmette, South to Boothville, West to Houma, Northwest
to Jeanerette thence East to the point of beginning. This territory
shall exclude the Parish of New Orleans.
Based on this language, and on the map exhibit derived from it, we agree with
the district court that “it is clear . . . that [the territorial descriptions] do not
overlap,” and that as a result, Northwood did not breach the contract by selling
trailers to Bourget’s within Innovative’s alleged “exclusive” territory.3
Innovative attempts to avoid this straightforward reading by offering parol
evidence that allegedly evidences an intent that the term “New Orleans” dealer
includes the “the Greater New Orleans area” or “the metropolitan area of New
Orleans,” which is defined by the United States Census as “including the seven
surrounding parishes of Orleans.” As this court has noted, however:
In general, under Louisiana law, extrinsic evidence cannot be
used to “negate or vary” the unambiguous terms of a written
contract. See Patterson [v. City of New Orleans], 686 So. 2d [87, 90
(La. Ct. App. 1996)]. “When the words of a contract are clear and
explicit and lead to no absurd consequences, no further
interpretation may be made in search of the parties’ intent.” La.
Civ. Code Ann. art. 2046; see also Steier v. Heller, 732 So. 2d 787,
792 (La. Ct. App. 1999) (“When the terms of a written contract are
clear, unambiguous, and lead to no absurd consequences, parol
evidence cannot be used to vary or explain the contract terms, and
the parties’ meaning or intent must be determined from the four
corners of the contract”); Patterson, 686 So. 2d at 90. Only where a
contract is ambiguous can a court base its interpretation on
extrinsic evidence. See Patterson, 686 So. 2d at 90. A contract is
ambiguous only if its terms are unclear or susceptible to more than
one interpretation, or the intent of the parties cannot be ascertained
from the language employed. See McDuffie v. Riverwood Int’l Corp.,
3
Correspondingly, Northwood owed no opportunity to Innovative to match Bourget’s
order.
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No. 07-30598
660 So. 2d 158, 160 (La. Ct. App. 1995).
Gebreyesus v. F.C. Schaffer & Assocs., 204 F.3d 639, 643 (5th Cir. 2000).
Applying these principles here, we (like the district court) hold that the
Innovative-Northwood agreement is clear and unambiguous: Innovative’s
territory does not encompass the City of New Orleans, and notwithstanding
Innovative’s argument to the contrary, “New Orleans” plainly means “the City
of New Orleans.” If a seasoned dealer like Innovative meant to secure a larger
coverage area, it should have said so in the contract; it cannot ask this court to
vary the explicit territorial provisions after the fact. Innovative’s parol evidence
is thus inadmissible, and given that the territory granted to Bourget’s in the
Northwood-Bourget’s agreement specifically excludes the Parish of Orleans, it
is likewise clear that Northwood did not breach the Innovative-Northwood
agreement by selling trailers to Bourget’s.
As for Innovative’s misrepresentation-of-facts (regarding the availability
of FEMA trailers) and price-coercion arguments, the terms of the Innovative-
Northwood agreement do not require Northwood to sell a certain number of
trailers to Innovative over a specific period of time, nor do they mention
anything about pricing or pricing negotiations.4 Consequently, Northwood did
not breach the express terms of the agreement in those respects, either.
E. Unfair Trade Practices
Finally, Innovative argues that the same actions taken by Northwood that
support a breach of contract claim also support a LUTPA claim. This argument,
however, is foreclosed by Turner v. Purina Mills, Inc., wherein this court
expressly acknowledged that LUTPA “does not provide an alternate remedy for
4
We note that while Innovative’s complaint charges Northwood with selling trailers to
Bourget’s at “different” or “inflated” prices, nowhere does the complaint allege a separate count
of price fixing in violation of the Sherman Act § 1. Accordingly, to the extent Innovative
attempts to do so, it may not raise an independent antitrust claim for the first time on appeal.
See Little v. Liquid Air Corp., 37 F.3d 1069, 1071 n.1 (5th Cir. 1994) (stating that “plaintiffs
may not advance on appeal new theories or raise new issues not properly before the district
court to obtain reversal of . . . summary judgment”).
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No. 07-30598
simple breaches of contract,” noting that “[t]here is a great deal of daylight
between a breach of contract claim and the egregious behavior the statute
proscribes.” 989 F.2d 1419, 1422 (5th Cir. 1993) (citing State ex rel. Guste v.
Orkin Exterminating Co., 528 So. 2d 198, 202 (La. Ct. App. 1988)).
Innovative’s contrary interpretation of Orkin is unpersuasive. Although
in that case the state appellate court allowed both a breach of contract claim and
an unfair trade practice claim, the court was careful to note:
[The defendant] contends that a mere breach of contract cannot
constitute an unfair trade practice. [It] focuses on a number of state
court decisions which support the proposition that private
controversies arising out of simple breaches of contracts do not
violate the statute. However, this is not a dispute between private
parties.
Orkin, 528 So. 2d at 202. The court reasoned that because the action was
brought by the State as an enforcement action, the State had the right to bring
an unfair trade practice claim based on the defendant’s modification of the
contract terms, which affected thousands of consumers. Id. Here, however,
because the dispute is between two private parties, the rationale for the
exception to the general rule does not apply.
Innovative’s reliance on Capitol House Preservation Co. v. Perryman
Consultants, Inc., is also misplaced. 725 So. 2d 523 (La. Ct. App. 1998). There,
the only cause of action alleged was an unfair trade practice claim, and no
contract existed between the parties. See id. at 524–26. As a result, there was
no breach of contract claim in addition to a LUTPA claim as presented here.
Accordingly, the district court did not err in concluding that “because . . .
[Northwood’s] conduct did not breach the contract with [Innovative],
[Northwood] clearly ha[d] not engaged in unfair trade practices vis-a-vis
[Innovative].”
IV. CONCLUSION
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No. 07-30598
Finding no error in the district court’s grant of summary judgment in favor
of Northwood, we AFFIRM.
11