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Black Hills Molding, Inc. v. Brandom Holdings, LLC

United States District Court, D. South Dakota, Western Division

September 8, 2015

BLACK HILLS MOLDING, INC., Plaintiff,
v.
BRANDOM HOLDINGS, LLC, Defendant.

ORDER

JEFFREY L. VIKEN, Chief Judge.

INTRODUCTION

Plaintiff Black Hills Molding, Inc., filed a complaint against the defendant Brandom Holdings, LLC, in the Seventh Judicial Circuit Court for Pennington County, South Dakota. (Docket 1-1). The complaint alleges breach of contract and promissory estoppel against the defendant. Id. Brandom Holdings timely filed a notice of removal pursuant to 28 U.S.C. §§ 1332 and 1446. Id. Defendant denies plaintiff's claims. (Docket 20). Pending before the court is the defendant's motion for summary judgment. (Docket 46). Plaintiff resists defendant's motion. (Docket 54). For the reasons stated below, defendant's motion for summary judgment is denied.

STANDARD OF REVIEW

Under Fed.R.Civ.P. 56(a), a movant is entitled to summary judgment if the movant can "show 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). Once the moving party meets its burden, the nonmoving party may not rest on the allegations or denials in the pleadings, but rather must produce affirmative evidence setting forth specific facts showing that a genuine issue of material fact exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). Only disputes over facts that might affect the outcome of the case under the governing substantive law will properly preclude summary judgment. Id. at p. 248. "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Id. at 247-48 (emphasis in original).

If a dispute about a material fact is genuine, that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party, then summary judgment is not appropriate. Id. However, the moving party is entitled to judgment as a matter of law if the nonmoving party failed to "make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In such a case, "there can be no genuine issue as to any material fact, ' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. at p. 323.

In determining whether summary judgment should issue, the facts and inferences from those facts must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). The key inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at pp. 251-52.

FACTUAL SUMMARY

The following recitation consists of the material facts developed from the complaint (Docket 1-1), defendant's answer (Docket 20), defendant's statement of undisputed material facts (Docket 48), plaintiff's response to defendant's statement of undisputed material facts (Docket 53) and other evidence where indicated. Where a statement of fact is admitted by the opposing party, the court will only reference the initiating document. These facts are "viewed in the light most favorable to the [plaintiff] opposing the motion." Matsushita Elec. Indus. Co., 475 U.S. at 587. The facts material to defendant's motion for summary judgment are as follows.

Black Hills Molding, Inc., ("BH Molding") is a South Dakota corporation operating in Rapid City, South Dakota. (Docket 1-1 ¶ 1). BH Molding is a manufacturer of drawer and cabinetry components. (Docket 48 ¶ 2). BH Molding had a business relationship with Brandom Southwest, Ltd., ("Brandom Southwest") under which plaintiff would import product from China and cut that product to Brandom Southwest's specifications. Id. ¶ 3.

On July 10, 2006, BH Molding and Brandom Southwest entered into a Non-Circumvention and Sales Agreement ("Sales Agreement"). Id. ¶ 4. David Mallams[1] and Andy Collins[2] signed the Sales Agreement on behalf of BH Molding and Brandom Southwest, respectively. (Dockets 51-2 at p. 4; 52-6 at p. 13:10-14-3; 53 ¶ 16). Matt Collins, Andy's son, was the purchasing manager for Brandom Southwest. (Docket 53 ¶ 16).

The Sales Agreement provided that BH Molding would maintain six to eight weeks' worth of inventory in Rapid City to fill orders for Brandom Southwest. (Docket 48 ¶ 5). The Sales Agreement imposed two obligations on Brandom Southwest. Id. ¶ 6. First, the Sales Agreement prevented Brandom Southwest from working directly with BH Molding's overseas suppliers. Id. Second, the Sales Agreement required Brandom Southwest to purchase any excess inventory remaining at BH Molding upon termination of the business relationship with plaintiff. Id. BH Molding required these commitments to protect the integrity of its overseas supplier relationships and to mitigate any financial risk it might be exposed to resulting from holding any excess inventory ordered from its overseas suppliers on behalf of Brandom Southwest. Id. ¶ 7. The inventory-purchase provision was sufficiently important that BH Molding probably would not have purchased inventory to hold for Brandom Southwest if it refused to sign the Sales Agreement. Id. ¶ 8.

Following execution of the Sales Agreement in 2006, BH Molding began stocking inventory in Rapid City to fill orders for Brandom Southwest. Id. ¶ 9. At the end of 2006, BH Molding held only a "pretty small amount" of inventory for Brandom Southwest. Id. ¶ 10. In 2007, BH Molding relied on usage projections from Brandom Southwest to order inventory to hold for filling Brandom Southwest's orders. Id. ¶ 11. The same projections and inventory system was used in 2008. Id. ¶ 12. By the end of 2008, the inventory held by BH Molding increased from the levels held in 2007. Id. ¶ 13. The inventory held by BH Molding to fill Brandom Southwest's orders reached its peak on August 10, 2009, totaling $304, 617.18.[3] Id. ¶ 14.

Brandom Holdings, LLC, ("Brandom Holdings") was organized under Texas law on September 30, 2008. Id. ¶ 15. On October 1, 2008, Brandom Holdings entered into an Asset Purchase Agreement with Brandom Southwest and its owners, David Capps, Andy Collins, and Brandom Manufacturing of Texas, Inc. Id. ¶ 19. By the terms of the Asset Purchase Agreement, Brandom Holdings acquired certain assets and assumed certain defined contractual obligations of Brandom Southwest.[4] Id. ¶¶ 20 & 21. The Sales Agreement between BH Molding and Brandom Southwest was not listed in the contractual obligations assumed by Brandom Holdings. Id. ¶ 23.

Andy Collins was a principal member of Brandom Holdings. (Docket 53 ¶ 16). Matt Collins remained as the purchasing manager for Brandom Holdings. Id. Brandom Southwest had been doing business as "Brandom Cabinets" and that business name was acquired by Brandom Holdings. (Docket 52-7 at p. 9). Brandom Holdings continued to do business as "Brandom Cabinets." (Docket 52-1 at p. 1). Brandom Holdings continued using the e-mail address for its employees previously used by Brandom Southwest ending in "@brandom.com." (Compare Dockets 51-2 at p. 5; 52-8; 52-4; 52-5 & 52-2) (chronologically). Brandom Southwest and Brandom Holdings had the same physical address: 404 Hawkins Street, Hillsboro, TX 76645. (Dockets 52-1 at p. 1; 53 ¶ 16). Both companies used the same toll free telephone number: 800-336-8001. (Dockets 51-2 at p. 3; 52-2 at p. 1; 53 ¶ 16). Inventory parts numbers were the same for Brandom Southwest and Brandom Holdings. (Docket 53 ¶ 16).

In the fall of 2009, David Mallams spoke with Matt Collins regarding the ownership change between Brandom Southwest and Brandom Holdings. (Docket 53 ¶ 25). As the purchasing manager for both Brandom Southwest and Brandom Holdings, Matt Collins was responsible for hundreds of thousands of dollars in lumber both companies needed to conduct their business. Id. Matt Collins told David Mallams that even though Brandom Southwest had been purchased by another company, BH Molding need not worry as it was still "business as usual." (Docket 53 ¶ 16) (referencing Docket 52-6 at pp. 33:4-34:24).

After David Harvick became the purchasing manager for Brandom Holdings, he and Gary Mallams[5] discussed the Sales Agreement. (Docket 53 ¶ 34) (referencing Docket 52-9 at p. 25:3-17). Gary Hallams told him about the Sales Agreement and that BH Molding "relied on Brandom Holdings to honor that agreement because we were told that business would be going on as usual." (Docket 52-9 at p. 25:17-20). Mr. Harvick asked that a copy of the Sales Agreement be faxed to Lena, an employee in accounting or some other office of Brandom Holdings. Id. at p. 26:5-22. A BH Molding secretary faxed the document. Id. at p. 26:10-22.

Later in the winter of 2009, Gary Mallams spoke with Joe Parziale who replaced Mr. Harvick in the purchasing department. (Docket 53 ¶ 38) (referencing Docket 52-9 at p. 29:11-12). During their conversation, Mr. Parziale said he was aware of the Sales Agreement. (Docket 52-9 at p. 29:6-10). They discussed the portion of the Sales Agreement which made Brandom Holdings "responsible for the inventory if they quit taking it." Id. at p. 28:6-10. Because Mr. Parziale felt he was going to be responsible for the inventory in the Sales Agreement, he was "going to do the ordering." Id. at p. 27:14-25. They had another conversation in early 2010 in which Mr. Parziale said he should be managing the inventory held by BH Molding because Brandom Holdings was "responsible" for that inventory. (Docket 48 ¶ 38).

Beginning in 2010, Brandom Holdings began working with BH Molding to reduce the inventory previously stocked to fill orders for Brandom Southwest. Id. ¶ 43. Some of that inventory was ordered in October 2009 after Brandom Holdings entered the picture. (Docket 53 ¶ 43). To prove this point BH Molding submitted a photograph of a shipping label dated October 27, 2009, shipping 900 pieces of part "BR14707."[6] (Docket 52-3). Also in 2010, Brandom Holdings began issuing specific instructions to BH Molding as to what inventory should be purchased. (Docket 48 ¶ 45). The merchandise was prepared to Brandom Holdings' specifications and was not available for sale to anyone else due to those specific dimensions. (Docket 53 at ¶ 45).

David Mallams had two conversations with Phyllis Brennan in the spring or summer of 2011. Id. ¶ 40. Ms. Brennan had replaced Mr. Parziale in the purchasing department of Brandom Holdings. Id. David Mallams told Ms. Brennan that Brandom Holdings was obligated to purchase the excess inventory which BH Molding had on hand. Id. On August 19, 2011, Ms. Brennan e-mailed David Mallams asking: "Please send me documentation of Brandom's agreements to order containers and pay for cutting/refinishing charges over and above the price quoted." (Docket 52-2 at pp. 2-3).[7] In an August 22, 2011, e-mail to Ms. Brennan, David Mallams wrote:

The container orders being taken over by Brandom occurred when Joe came in and happened about May of 2010. We discussed our inventory mess here due to in accurate [sic] usage numbers. Joe made the decision that since Brandom was responsible for the inventory we had here that he should be making the decisions as to what we are going to order in future containers.

(Docket 52-2 at pp. 2-3). Included in David Mallams' e-mail was John Huff, a consultant and later Vice President of Operations for Brandom ...


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