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Qwinstar Corp. v. Anthony

United States Court of Appeals, Eighth Circuit

February 16, 2018

Qwinstar Corporation Plaintiff- Appellant
v.
Curtis Anthony; Pro Logistics, LLC Defendants - Appellees Qwinstar Corporation Plaintiff- Appellant
v.
Curtis Anthony; Pro Logistics, LLC Defendants - Appellees

          Submitted: October 19, 2017

         Appeals from United States District Court for the District of Minnesota - Minneapolis

          Before WOLLMAN and SHEPHERD, Circuit Judges, and GOLDBERG, Judge. [1]

          SHEPHERD, Circuit Judge.

         Qwinstar Corporation and Pro Logistics, LLC, engaged in negotiations that culminated with Qwinstar agreeing to purchase Pro Logistics and employ its owner-Curtis Anthony[2]-for a term of five years. A few months after the sale, Qwinstar terminated Anthony's employment and filed this lawsuit against him, alleging that it did not receive the inventory it bargained for in the sale. Anthony counterclaimed, asserting that Qwinstar breached the employment contract by not paying him for the full five-year term. The parties each filed motions for summary judgment, and the district court granted Anthony's motion and denied Qwinstar's. We affirm in part and reverse in part.

         I. Background

         Qwinstar and Pro Logistics are or were engaged in the business of selling and repairing old IBM check-processing systems-specifically, the IBM 3890. Pro Logistics primarily sold new and refurbished parts for this machine. Qwinstar also sells these parts, but, in addition, it has a large repair business. As a result, Qwinstar and Pro Logistics competed for many of the same customers. With the advent of computer-based systems, the demand for the parties' business shrunk considerably, and Qwinstar began efforts to acquire its competitors to increase its market share.

         Negotiations between Qwinstar and Anthony ensued. In January of 2013, Anthony completed an inventory of all of the parts he owned at the time, and this 56-page document showed a total parts value of over $4.7 million. Anthony provided this inventory to Qwinstar. Subsequently, Qwinstar employees visited Pro Logistics on three separate occasions over the next several months, but no one ever made an independent inventory of the parts or compared the parts present in the warehouse to those represented in Anthony's inventory document. Ultimately, Anthony agreed to sell all of his machine parts to Qwinstar in return for $50, 000 and a five-year employment contract with Qwinstar at a salary of $200, 000 per year. The parties memorialized these terms in two separate contracts: (1) the Asset Purchase Agreement (APA), which dealt primarily with the transfer of Anthony's parts inventory to Qwinstar; and (2) the Employment Agreement (EA), which concerned Anthony's assumed role with Qwinstar after the sale.

         After performing under these contracts for almost one year, Anthony notified Qwinstar that its parts inventory was getting low on some items. Qwinstar sent two employees to investigate the shortage, both of whom made comments afterward about the sparse quantity of parts that existed at the Pro Logistics facility. However, as with the previous visits, no one documented the remaining parts or compared the parts present to those in the January inventory. One month later, Qwinstar sent Anthony an email stating that $1 million in parts had been sold since the business arrangement had been finalized, and demanding that Anthony account for the remaining $3.4 million[3] in parts that Qwinstar purportedly purchased. Qwinstar later recovered about $600, 000 in additional parts from Anthony. Shortly thereafter, Qwinstar terminated Anthony for alleged cause and filed suit to recover the claimed shortfall in the parts inventory.

         Qwinstar filed the present action asserting a breach of the APA, among other claims not relevant here. Anthony counterclaimed that Qwinstar breached the EA by failing to pay him for the full five-year contract term. Qwinstar moved for partial summary judgment, asserting that it had proven Anthony's liability for breach of the APA as a matter of law and that Anthony's counterclaim should be dismissed. Anthony moved for full summary judgment, arguing that (1) Qwinstar's APA claim should be dismissed because it could not identify a single asset that it purportedly purchased and failed to receive, and (2) Anthony was entitled to affirmative summary judgment on his counterclaim because Qwinstar terminated him without cause and without paying the full sum due under the contract. The district court first granted summary judgment to Anthony on Qwinstar's APA claim, finding that Qwinstar could not establish exactly what inventory it purchased under the APA as a result of its failure to inventory the items at the time of the sale. Qwinstar argued that the January 2013 inventory represented an accurate inventory of parts purchased, but the district court stated that the list was outdated and Qwinstar was well aware that Anthony was still selling parts during the intervening months between the date of the inventory and the execution of the APA. As a result, the district court held that Qwinstar could not establish the breach element of its claim. Next, the court granted summary judgment to Anthony on his counterclaim, finding that the contract provision governing Anthony's compensation after termination was ambiguous, and, as a result, that it must be construed against Qwinstar. Qwinstar appeals.

         II. Discussion

         A party is entitled to "summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). When construing an unambiguous contract, "interpretation is a question of law, and is reviewed de novo." Swift & Co. v. Elias Farms, Inc., 539 F.3d 849, 851 (8th Cir. 2008) (internal quotation marks omitted). On the other hand, "[i]f the contract is ambiguous, . . . the meaning of the contract becomes a question of fact, and summary judgment is inappropriate unless the evidence of the parties' intent is conclusive." Id. (citing Donnay v. Boulware, 144 N.W.2d 711, 716 (Minn. 1966)).

         Qwinstar argues that the January 2013 inventory established the list of items it purchased in the APA and that the EA clearly states that Anthony's full compensation is guaranteed only in the event of his death or disability. We agree with Qwinstar's latter assertion and summary judgment was premature given the ambiguous nature of the EA provisions at issue, but we reject the former because, under the unambiguous terms of the APA, Qwinstar received that ...


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